Natural Gas Advances as Cold Weather Speeds Stockpile Declines

Feb 06, 2014 9:47 am ET

Feb. 6 (Bloomberg) -- Natural gas futures advanced in New York before a government report that may show accelerating U.S. stockpile declines as frigid weather boosts demand.

Gas gained as much as 7.3 percent as U.S. Energy Information Administration data may show that inventories fell 274 billion cubic feet last week, based on the median of 25 analyst estimates compiled by Bloomberg. Supplies fell by 129 billion a year earlier and the five-year average drop for the period is 151 billion.

“Traders in the market are overall bullish because of the weather that we have seen in the past week in the Midwest and the Northeast,” said Santiago Diaz, associate of energy trading at FCStone Latin America LLC in Miami. “They are factoring in that we are going to get a large withdrawal and they are getting ready for the fireworks. There’s going to be a lot of buying activity and prices are going to move higher.”

Natural gas for March delivery rose 14.4 cents, or 2.9 percent, to $5.174 per million British thermal units at 9:24 a.m. on the New York Mercantile Exchange. Trading volume was 56 percent above the 100-day average. The futures are up 22 percent this year.

Gas stockpiles totaled 2.193 trillion cubic feet as of Jan. 24, 16.6 percent below the five-year average, the biggest deficit in data going back to 2005. Supplies were down 23 percent from the same week last year.

The second winter storm of the week swept into the U.S. Northeast yesterday, and another system is forecast for the region in about three days. Four inches (10 centimeters) of snow fell in New York’s Central Park, topped by a quarter-inch of ice, according to the National Weather Service. More than 12 inches were reported in the city’s northern suburbs.

Credit Suisse

Credit Suisse Group AG raised its first-quarter gas price forecast by 50 cents to $4.80 per million Btu, the bank said in a research note today. The full-year estimate was raised by 13 percent to $4.30, according to the note.

“Risks to further price blow-outs appear most likely in the Midwest, where inventories are at nine-year lows, utilizing just 40 percent of availably capacity,” the bank said.

About 49 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.

--With assistance from Chou Hui Hong in Singapore and Anna Shiryaevskaya in London. Editors: Bill Banker, Charlotte Porter