Natural Gas Futures Rise as Spring Cold May Limit Supply Gains

Apr 07, 2014 4:00 pm ET

April 7 (Bloomberg) -- Natural gas futures gained in New York for the third time in four days on speculation that a cool start to spring will slow the pace of replenishing stockpiles from an 11-year low.

Gas advanced 0.8 percent. MDA Weather Services in Gaithersburg, Maryland, predicted colder-than-normal weather in the Midwest and parts of the eastern U.S. from April 12 through April 21. Inventories fell to 822 billion cubic feet in the week ended March 28, the least since 2003, government data show.

“The cold temperatures seem to suggest that it’s going to be a lot harder to refill storage before winter heating demand kicks in,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “We’re going to have a slow start to the storage injection season.”

Natural gas for May delivery rose 3.7 cents to settle at $4.476 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 20 percent below the 100-day average at 2:40 p.m. The futures are up 5.8 percent this year.

JPMorgan Chase & Co. raised its 2014 gas price forecast to $4.58 per million Btu from $3.90 and increased its 2015 estimate to $4.20 from $4.05, Scott Speaker, an analyst at the bank in New York, said in a note to clients dated April 4.

“The absolute level of working gas inventories combined with the physical and economic implications of necessary April- October storage injections has effectively forced us to raise our 2014 and early-2015 price expectations,” Speaker said.

Stockpile Increase

Energy Information Administration data scheduled for release April 10 may show gas stockpiles climbed by 5 billion cubic feet in the week ended April 4, the first injection of the season, according to Citi Futures in New York. The five-year average gain for the period is 9 billion.

Gas stockpiles were a record 54.7 percent below the five- year average and 51.6 percent less than the year-earlier total as of March 28, EIA data show. The EIA is the Energy Department’s statistical arm.

The low in Chicago on April 14 may be 34 degrees Fahrenheit (1 Celsius), 7 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Cleveland temperatures may fall to 41 degrees, 1 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. Gas demand in January was the highest on record at 104 billion cubic feet a day, 12 percent above year-earlier consumption, according to the EIA.