Bloomberg News

Natural Gas Advances on Outlook for Below-Normal Inventory Gain

October 17, 2012

Natural gas futures climbed in New York for the first time in three days on speculation that government data may show a smaller-than-normal increase in stockpiles for last week.

Gas advanced as much as 1.3 percent before the Energy Department report tomorrow that may show an inventory gain of 47 billion cubic feet in the week ended Oct. 12, according to the median of 15 analyst estimates compiled by Bloomberg. The five- year average gain for the week is 71 billion.

“It was a little colder last week, so the storage injection may be a bit smaller than average,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Traders have been anticipating the upcoming winter demand.”

Natural gas for November delivery rose 1.9 cents, or 0.6 percent, to $3.456 per million British thermal units at 11:52 a.m. on the New York Mercantile Exchange. The futures are down 6.3 percent from a year ago. Prices reached $3.611 per million Btu on Oct. 12, the highest settlement since Dec. 1.

December $3.05 puts were the most active gas options in electronic trading. They were 0.2 cent lower at 0.8 cent on volume of 821 contracts as of 11:41 p.m. Puts accounted for 46 percent of options volume.

Inventories of gas totaled 3.725 trillion cubic feet in the week ended Oct. 5, 7.8 percent above the five-year average. The surplus to the average was down from 61 percent on March 30. Stockpiles may reach 3.903 trillion by Oct. 31, below estimated capacity of 4.239 trillion, Energy Department data show.

Commodity Weather Group LLC in Bethesda, Maryland, predicted cooler-than-normal weather in the central U.S. from Oct. 27 through Oct. 31.

Cooler Weather

The low in Chicago on Oct. 27 may be 27 degrees Fahrenheit (minus 3 Celsius), 15 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Minneapolis may be 24 degrees, 12 less than the usual reading.

About 50 percent of U.S. households use gas for heating, according to the Energy Department.

The winter of 2012-2013 will probably boost the use of heating fuels compared with last year and leave above-normal snowfall from Massachusetts to Alabama, AccuWeather said.

The coldest part of the winter will probably be in February, with slightly warmer-than-average weather in December that may bring the entire season near normal, said Paul Pastelok, long-range forecaster for AccuWeather.

A boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

The number of rigs drilling for natural gas in the U.S. fell by 15 to 422 last week, the lowest level since June 1999, according to data released Oct. 12 by Baker Hughes Inc. in Houston. The rig count has dropped 48 percent this year.

U.S. natural gas may need to rise to $6 per million Btu to spur enough production to meet liquefied natural gas export demand, Howard Rogers, director of natural gas research at the Oxford Institute for Energy Studies, said in a report today.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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