Bloomberg News

Natural Gas Climbs After Inventory Decline Erases Storage Glut

April 04, 2013

Natural gas futures in New York climbed for the first time in five days after a government report showed that U.S. stockpiles were at a deficit to the five-year average for the first time in 18 months.

Gas advanced as much as 2 percent after an Energy Information Administration report showed inventories fell 94 billion cubic feet in the week ended March 29 to 1.687 trillion cubic feet, the biggest decline on record for this time of year. Supplies were 2.1 percent below the five-year average. Analyst estimates compiled by Bloomberg showed a drop of 91 billion.

“We’ve definitely seen some demand for natural gas that we didn’t have a year ago,” said Gordy Elliott, a risk-management specialist at INTL FCStone Inc. in St. Louis Park, Minnesota. “We’re looking at another week of inventory withdrawals ahead.”

Natural gas for May delivery rose 2 cents, or 0.5 percent, to $3.919 per million British thermal units at 11:20 a.m. on the New York Mercantile Exchange. Gas traded at $3.942 before the storage number was released at 10:30 a.m. in Washington. Volume was 56 percent above the 100-day average. The futures have climbed 17 percent this year.

The discount of May contracts to October narrowed 0.4 cent to 12.3 cents. The discount of October to January fell 0.5 cent to 31.2 cents.

May $3.80 puts were the most active gas options in electronic trading. They slipped 1.3 cents to 5.1 cents per million Btu on volume of 294 contracts as of 11:21 a.m. Puts accounted for 48 percent of options volume.

Options Volatility

Implied volatility for at-the-money gas options expiring in May was 27.31 percent at 11:15 a.m., down from 28.32 percent yesterday. June options volatility was 26.73 percent, down from 27.15 percent.

A survey of Bloomberg users had predicted a storage withdrawal of 95 billion cubic feet. The five-year average change for the week is a gain of 4 billion, department data show. Supplies were a record 31.6 percent below year earlier levels.

The number of rigs drilling for gas in the U.S. fell by 29 to 389 last week, according to data from Baker Hughes Inc. in Houston. Gas rigs are at the lowest level since 1999.

Temperatures may be below-normal in the Midwest from April 9 through April 13, according to Commodity Weather Group LLC in Bethesda, Maryland.

The low in Chicago on April 10 may be 38 degrees Fahrenheit (3 Celsius), 2 lower than the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. The low in Minneapolis may be 30 degrees, 5 less than average.

Gas Production

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

U.S. natural gas production in the lower 48 states fell in January to the lowest level since March 2012 as gas-plant maintenance and frigid weather hampered output, a government report showed March 29.

Production in the lower 48 states slid 0.9 percent to 72.1 billion cubic feet a day from a revised 72.77 billion in December, the EIA said in the monthly EIA-914 report. Output was down 0.8 percent in January from a year earlier.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. The U.S. produced 84 percent of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88 percent in December, the highest since February 1987.

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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