Bloomberg News

Natural Gas Climbs on Biggest Stockpile Drop in Almost Two Years

January 10, 2013

Natural gas futures advanced for the first time in four days after a government report showed that U.S. stockpiles declined by the most in almost two years.

Gas gained 2.6 percent after the Energy Department said inventories fell 201 billion cubic feet in the seven days ended Jan. 4 to 3.316 trillion cubic feet, the biggest weekly decline since February 2011. Analyst estimates compiled by Bloomberg showed an expected drop of 191 billion.

“This was definitely a bullish withdrawal,” said Kent Bayazitoglu, an analyst at Gelber & Associates in Houston. “It was a cold week. People had reduced their expectations because of the New Year’s holiday, but this number would have been bullish even if it hadn’t been a holiday week.”

Natural gas for February delivery rose 8 cents to settle at $3.193 per million British thermal units on the New York Mercantile Exchange. Prices have climbed 8.6 percent from a year ago. Trading volume was up 14 percent from the 100-day average at 334,279 as of 3:04 p.m. Volume was 40 percent below the average before the supply report was released.

February $3.50 calls were the most active gas options in electronic trading. They were 0.3 cent higher at 1.2 cents on volume of 962 contracts as of 2:45 p.m. Calls accounted for about half of options volume.

Gas for March delivery traded 1.5 cents above the February contract, compared with 1.8 cents yesterday.

Stockpile Surplus

The five-year average stockpile decline for the week is 121 billion cubic feet, according to FirstEnergy Capital Corp. in Calgary. A surplus to the five-year average fell to 10.7 percent from 12.4 percent the previous week. Supplies were 2.6 percent below year-earlier inventories, the widest deficit since September 2011.

The weather may be colder than normal in the Northeast from Jan. 20 through Jan. 24, according to Commodity Weather Group LLC in Bethesda, Maryland.

The low in New York on Jan. 20 may be 16 degrees Fahrenheit (minus 7 Celsius), 11 lower than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Boston may be 21 degrees, 1 below average.

About 50 percent of U.S. households use gas for heating, Energy Department data show.

The department increased its estimate for 2013 natural gas prices in a Jan. 8 report, citing more normal winter heating demand compared with last year. Gas at the benchmark Henry Hub in Erath, Louisiana, will average $3.74 per million Btu, up from the December estimate of $3.68, according to the monthly Short- Term Energy Outlook. Prices averaged $2.75 in 2012.

Production Gain

Natural gas output in the lower-48 states rose to an all- time high in October as more of the fuel was pumped from shale formations in the Northeast and North Dakota, the department said Jan. 7.

Gross gas production increased 0.4 percent to 73.54 billion cubic feet a day from a revised 73.22 billion in September, the department’s Energy Information Administration said in the monthly EIA-914 report.

Supplies from the “other states” category rose 1.8 percent to 23.94 billion cubic feet a day from a revised 23.51 billion in September. Production in that region advanced “as operators reported new wells coming online in the Marcellus and Bakken shale plays,” the department said.

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 nine months of last year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

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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