Natural Gas Pares Weekly Gain on Forecasts for Milder Weather

Feb 14, 2014 3:40 pm ET

Feb. 14 (Bloomberg) -- Natural gas futures slipped in New York, paring a weekly gain, as meteorologists predicted moderating weather that would cut demand for the heating fuel after a winter storm this week.

Gas slid after gaining 3.2 percent in earlier trading. MDA Weather Services said temperatures will be higher than average in the eastern U.S. from Feb. 19 through Feb. 23. The low in New York on Feb. 20 may be 38 degrees Fahrenheit (3 Celsius), 8 more than usual, according to AccuWeather Inc.

“The calendar is the bearish case for gas,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “One would assume that unless we’re getting into an ice age, the days should be getting longer and spring should be coming.”

Natural gas for March delivery fell 0.9 cent to settle at $5.214 per million British thermal units on the New York Mercantile Exchange. Trading volume was 27 percent above the 100-day average at 2:48 p.m. The futures are up 23 percent this year and gained 9.2 percent this week, capping the first weekly increase since Jan. 24.

Implied volatility for March at-the-money options was 88.54 percent at 3 p.m., compared with 29.84 percent a year ago. Gas is the most volatile component this year in the Standard & Poor’s GSCI index of 24 commodities.

March gas traded 63.7 cents above the April contract, compared with 59.1 cents yesterday.

Chicago Weather

The low in Chicago on Feb. 20 may be 32 degrees, 9 above normal, AccuWeather in State College, Pennsylvania, said on its website. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

A winter storm that spread snow and ice from Texas to Maine this week began moving out to sea as a second system takes aim at eastern New England.

Boston may get 6 inches (10 to 15 centimeters) of snow from the storm, which is expected to intensify off the Atlantic Coast tomorrow, the National Weather Service said. New York may get 2 to 4 inches.

The EIA said yesterday that U.S. stockpiles tumbled 237 billion cubic feet to 1.686 trillion in the week ended Feb. 7, the biggest February drop since 2007.

Low Supplies

Inventories were the lowest for this time of year since 2004. The storage drop was 46 percent bigger than the five-year average for the week. A deficit to five-year average levels widened to a record 27 percent from 22 percent the previous week. Supplies were down 34 percent from a year earlier, also the most in data going back to 2005.

Gas inventories at the end of March, when the heating season draws to a close, will drop to 1.33 trillion cubic feet, the lowest level since 2008, the EIA estimated Feb. 11 in its monthly Short-Term Energy Outlook.

Gas output in 2014 may climb 2.2 percent to a record 71.76 billion cubic feet a day, gaining for a ninth consecutive year, the EIA said in the report.

The number of rigs drilling for gas in the U.S. fell by 14 to a 19-year low of 337 this week, according to data released today by Baker Hughes Inc. in Houston.

--Editors: Bill Banker, Richard Stubbe