Bloomberg News

Natural Gas Futures Rise After Biggest Drop in 12 Days

December 20, 2012

Natural gas futures in New York climbed the most in two weeks after a government report showed U.S. stockpiles fell more than expected last week.

Gas advanced 4.3 percent on an Energy Department report that inventories dropped 82 billion cubic feet in the week ended Dec. 14 to 3.724 trillion. Analyst estimates compiled by Bloomberg forecast a withdrawal of 75 billion, while a survey of Bloomberg users predicted a decrease of 76 billion.

“The storage number was a bullish surprise for the market,” said Gordy Elliott, a risk-management specialist at INTL FCStone Inc. in St. Louis Park, Minnesota. “We’ve had some cold weather and we had been selling off for a few days, so we were due for a rally.”

Natural gas for January delivery rose 14.2 cents to settle at $3.462 per million British thermal units on the New York Mercantile Exchange. The percentage gain was the biggest since Dec. 5.

The futures are up 16 percent this year, heading for the first annual increase since 2007. Prices declined to $3.261 per million Btu in intraday trading on Dec. 14, the lowest level since Sept. 28.

February $3 puts were the most active gas options in electronic trading. They were 2.1 cents lower at 2.3 cents on volume of 3,947 contracts as of 3:03 p.m. Puts accounted for 56 percent of options volume.

Stockpile Decline

The stockpile decrease was smaller than the five-year average decline for the week of 144 billion cubic feet, department data show. A surplus to the five-year average rose to 10.2 percent from 8 percent the previous period. Supplies were 1.8 percent above year-earlier inventories, compared with 1.3 percent last week.

The gas inventory surplus to the average has slipped from a six-year high of 61 percent in March, department data show.

MDA Weather Services predicted lower-than-average temperatures in parts of the Midwest from Dec. 25 through Dec. 29. Earlier outlooks showed mostly normal readings.

The low in Chicago on Dec. 27 may be 14 degrees Fahrenheit (minus 10 Celsius), 6 less than usual, according to AccuWeather Inc. The low in Des Moines, Iowa, may be 15 degrees, 1 lower than normal. About 50 percent of U.S. households use gas for heating, Energy Department data show.

The U.S. raised its forecast for natural gas output in 2012 by 0.6 percent in a report Dec. 11 and boosted its outlook for prices.

Marketed Production

Marketed gas production will average 69.22 billion cubic feet a day this year, up from 68.84 billion estimated in November, the Energy Department said in the monthly Short-Term Energy Outlook. Output may rise 0.5 percent in 2013 to 69.59 billion a day, department estimates show.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $2.78 per million British thermal units, compared with the previous estimate of $2.77, according to the report from the department’s Energy Information Administration.

The 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 eight 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 gas in the U.S. slipped by one to 416 last week, according to data from Baker Hughes Inc. (BHI:US) in Houston. The rig count is down 49 percent this year.

Gas futures volume in electronic trading on the Nymex was 322,788 as of 2:48 p.m., compared with the three-month average of 362,000. Volume was 324,983 yesterday. Open interest was 1.16 million contracts, matching the three-month average.

The exchange has a one-business-day delay in reporting full volume and open interest data.

To contact the reporters 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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Companies Mentioned

  • BHI
    (Baker Hughes Inc)
    • $66.14 USD
    • -1.60
    • -2.43%
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