Natural Gas Gains Most in 5 Weeks on Above-Forecast Supply Drop

Mar 27, 2014 3:24 pm ET

March 27 (Bloomberg) -- Natural gas futures climbed the most in five weeks after a government report showed that U.S. stockpiles fell more than forecast last week, depleting supplies already at an 11-year low.

Gas gained 4.1 percent, the biggest gain since Feb. 19, as the Energy Information Administration said supplies fell 57 billion cubic feet in the week ended March 21 to 896 billion, the lowest since 2003. A survey of Bloomberg users predicted a drop of 51 billion. Gas rose to a five-year high in February as below-normal temperatures stoked demand for the heating fuel.

“The number was bigger than expectations,” said Kent Bayazitoglu, an analyst at Gelber & Associates in Houston. “We’re not quite out of the woods yet in terms of more storage withdrawals to come. The market could see some additional tightness.”

Natural gas for April delivery rose 18.2 cents to settle at $4.584 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 16 percent below the 100-day average at 2:46 p.m. Prices are up 8.4 percent this year.

April futures expired today. The more actively traded May contract climbed 14.3 cents to $4.538.

Bank of America Corp. raised its 2014 gas price estimate to $4.40 per million Btu from $3.90, citing cold weather and inventory withdrawals totaling 2.8 trillion cubic feet since the end of October, the largest seasonal decline on record.

October Estimate

Stockpiles may total 3.46 trillion cubic feet by the end of the injection season in October, Francisco Blanch, global head of commodity research at the bank in New York, said in a note to clients today. Supplies reached 3.83 trillion last year, EIA data show.

The stockpile decrease was bigger than the five-year average decline for the week of 7 billion cubic feet, department data show. A deficit to the five-year average widened to a record 50.8 percent from 47.9 percent the previous week. Supplies were 50.1 percent below year-earlier inventories, compared with 49.4 percent in last week’s report.

MDA Weather Services in Gaithersburg, Maryland, predicted below-normal temperatures in parts of the Northeast and Midwest through April 5.

April Weather

The low in New York on April 1 may be 38 degrees Fahrenheit (3 Celsius), 2 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago temperatures may fall to 30 degrees, 6 lower than usual.

About 49 percent of U.S. households use gas for heating, with the biggest share in the Midwest, EIA data show.

Commodity Weather Group LLC in Bethesda, Maryland, said December through February was the coldest for that period in the lower-48 states since the winter of 1981-1982, based on energy- weighted heating degree days, a measure of weather-driven demand.

Gross gas production in the lower-48 states slipped 1.5 percent to 74.8 billion cubic feet a day in December from a revised 75.97 billion in November, the EIA said Feb. 28 in its monthly EIA-914 report. Output in Texas, Oklahoma and New Mexico declined as freezing weather caused shut-ins. The next report is scheduled for release on March 31.