Natural Gas Futures Cap Weekly Gain on Outlook for Polar Blast

Feb 21, 2014 3:41 pm ET

Feb. 21 (Bloomberg) -- Natural gas futures climbed in New York, capping a second weekly gain, on forecasts for an arctic blast that would deplete inventories of the heating fuel, already at the lowest in a decade.

Gas rose 1.2 percent after reaching a five-year high of $6.40 per million British thermal units in intraday trading yesterday. MDA Weather Services said temperatures may be lower than normal in the eastern two-thirds of the U.S. from Feb. 26 through March 7. U.S. stockpiles tumbled 250 billion cubic feet to 1.443 trillion in the week ended Feb. 14, the least for that period since 2004, government data show.

“The same weather and inventory factors that propelled the market to five-year highs are holding,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market has been looking really strong.”

Natural gas for March delivery gained 7.1 cents to settle at $6.135 per million British thermal units on the New York Mercantile Exchange. Trading volume was 13 percent above the 100-day average at 2:48 p.m. The futures advanced 18 percent this week. Gas has climbed 45 percent in 2014, the second- biggest gainer, after coffee, in the Standard & Poor’s GSCI index of 24 commodities.

March gas traded $1.123 above the April contract, compared with a record $1.208 yesterday. Implied volatility for April at- the-money options was 55.2 percent at 2:48 p.m., compared with 31.59 percent a year ago for April 2013 options.

March $9 calls were the most active options in electronic trading. They were unchanged at 0.6 cent per million Btu on volume of 2,967 at 3:09 p.m. Calls accounted for 81 percent of trading volume.

Boston Weather

The low in Boston on Feb. 27 may be 11 degrees Fahrenheit (minus 12 Celsius), 16 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. Cleveland temperatures may fall to minus 4 degrees, 32 below average.

January was the coldest start to a year since 2001, the National Oceanic and Atmospheric Administration said in a report Feb. 13. About 49 percent of U.S. households use gas for heating, with the biggest share in the Midwest, according to the Energy Information Administration, the Energy Department’s statistical arm.

Citigroup Inc. raised its estimate for average 2014 Nymex gas futures to $5 per million Btu from a November forecast of $3, Anthony Yuen, an analyst at the bank in New York, said in a note to clients today.

Gas stockpiles were at a record deficit of 34 percent to the five-year average in the week ended Feb. 14, EIA data show.

“A much colder-than-normal winter sharply drew down gas inventories, pushing the expected end-of-March storage below 1- Tcf, which was last seen in 2003,” Yuen said.

--Editors: Bill Banker, Charlotte Porter