Natural gas rose for a second day in New York on speculation that government weather models showing colder weather next month will spur heating-fuel demand.
Gas gained 0.1 percent after the Global Forecast System model run by the National Oceanic and Atmospheric Administration showed Midwest temperatures over the next two weeks will be lower than predicted earlier today. Gas had dropped as much as 2.8 percent after a government report showed a smaller-than- forecast decline in U.S. stockpiles.
“The model came in colder across the board,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “We probably won’t see the cold weather linger. It’s important for the market in that there is still hope that heating demand will help lower inventory levels to more manageable levels in advance of the summer injection season.”
Natural gas for March delivery rose 0.4 cent to settle at $3.339 per million British thermal units on the New York Mercantile Exchange. Trading was up 44 percent from the 100-day average at 2:52 p.m. Gas futures dropped 0.4 percent in January, the third straight monthly decline.
March $3.50 calls were the most active gas options in electronic trading. They were 0.1 cent lower at 5.8 cents per million Btu on volume of 1,424 contracts as of 3:23 p.m. Calls accounted for 57 percent of options volume.
Gas futures oscillated between gains and losses throughout the session as the changing weather outlook spurred speculation that demand for the heating fuel would be stronger, while the stockpile report showed an expanding surplus.
The updated models showed even colder weather for the next five days and showed below-normal temperatures for the Midwest next week, Viswanath said. About 50 percent of U.S. households use gas for heating, EIA data show.
Earlier forecasts indicated that below-normal temperatures in the eastern two-thirds of the U.S. would be replaced by normal readings next week, according to Commodity Weather Group LLC in Bethesda, Maryland.
Williams Partners LP (WPZ:US) delivered a record amount of gas on the Transco interstate pipeline to the Eastern Seaboard last week because of bitterly cold weather.
Volume rose to 10.4 million dekatherms on Jan. 22, surpassing the previous peak of 9.7 million set early last year, the company said in a statement today. Transco also set a three- day delivery record from Jan. 22 to Jan. 24 at an average of 9.9 million a day, the company said. Volume on the 10,000-mile pipeline system extends from South Texas to New York,
U.S. inventories fell 194 billion cubic feet in the week ended Jan. 25, the Energy Information Administration said in today’s report. Analyst estimates compiled by Bloomberg showed a drop of 204 billion and a survey of Bloomberg users predicted a decline of 201 billion. The five-year average change for the week is a decrease of 178 billion cubic feet.
A supply surplus to the five-year average rose to 12.2 percent from 12 percent the previous week, according to the EIA, the statistical arm of the Energy Department. A deficit versus year-earlier levels widened to 6.7 percent from 5 percent.
The supply glut versus the five-year average has fallen from a six-year high last March, as a hotter-than-normal summer and decade-low gas prices spurred record demand for the fuel from electricity generators.
Last year was the warmest in records going back to 1895 for the 48 contiguous U.S. states and the second-worst for weather extremes including drought, hurricanes and wildfires, according to the National Oceanic and Atmospheric Administration.
Natural gas production in the lower-48 states rose to an all-time high in November as more of the fuel was pumped from shale formations in the Northeast and two gas plants returned to full production in Wyoming, the EIA said in a monthly report today.
Gross gas output from the region increased 0.6 percent to 73.88 billion cubic feet a day from a revised 73.47 billion in October, according to the EIA-914 report.
U.S. marketed output will increase 0.9 percent to an all- time high of 69.94 billion cubic feet a day in 2013 after increasing 4.8 percent to 69.19 billion last year, the EIA said Jan. 8 in its monthly Short-Term Energy Outlook.
The number of rigs drilling for gas totaled 434 last week, down 46 percent from a year earlier, according to Baker Hughes Inc. in Houston.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84 percent of its energy needs in the first 10 months of last year, government data show. If the trend continued through the end of 2012, it would be the highest level of self-sufficiency since 1991.
To contact the reporter on this story: Naureen S. Malik in New York at Nmalik28@bloomberg.net;
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