Natural gas futures climbed to a 13-week high in New York after a government report showed that U.S. inventories fell by more than forecast last week as cold weather boosted demand.
Gas rose 3.2% after the Energy Information Administration said stockpiles fell 146 billion cubic feet in the week ended March 1 to 2.083 trillion, sending a year-over- year deficit to the widest gap since July 2008. Analyst estimates compiled by Bloomberg showed a decline of 132 billion cubic feet. Below-normal temperatures swept across most of the U.S. last week, according to Commodity Weather Group LLC.
“You are still driven mostly by Mother Nature and that can be a huge deviation,” said Kyle Cooper, director of research with IAF Advisors in Houston. “You have a bullish year-on-year comparison and there is a lot of upward momentum in the market.”
Natural gas for April delivery gained 11.2 cents to $3.582 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Dec. 6. Trading volume was 53 percent above the 100-day average at 2:42 p.m. The futures have risen 6.9% this year.
April $3.25 puts were the most active gas options in electronic trading. They declined 1.3 cents to 1 cent per million Btu on volume of 721 contracts at 2:43 p.m. Puts accounted for 51% of options volume.
The discount for April contracts to October, a gauge of summer demand for gas, narrowed 2.1 cents to 19.7 cents, the least since Dec. 18. The discount over the past month has been at its narrowest compared with any April-October spread for the same period going back to 2004.
The stockpile decrease was bigger than the five-year average decline for the week of 107 billion cubic feet, EIA data show. Supplies fell by 92 billion during the same period last year. The previous winter was the fourth-warmest on record for the lower 48 states, which reduced demand amid record production.
A surplus to the five-year average narrowed to 14.8% from 16% the previous week. Gas supplies were also 14.8% below year-earlier inventories, compared with 12.1% in last week’s report.
The bigger-than-expected withdrawal from storage is indicative of the cold snap last week and a seasonal shutdown of nuclear generation, said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “It’s maintenance season and we have less electrons being fired up by the nukes so that is steering demand toward natural gas.”
Output from U.S. nuclear plants today totaled 86,034 megawatts, or 84% of capacity, according to U.S. Nuclear Regulatory Commission data compiled by Bloomberg. Production has fallen 10% from this year’s high reached on Feb. 1.
A wet, windy storm may drop 4 to 6 inches (15 to 12 centimeters) of snow in Boston and 1 to 3 inches may accumulate in New York City after dark, according to the National Weather Service in Taunton, Massachusetts.
The outlook for the eastern third of the U.S. turned colder for March 12 through March 16 with below-normal temperatures spreading from the Midwest and into the mid-Atlantic states, according to MDA Weather Services. The Gaithersburg, Maryland- based company said a “much warmer pattern” is developing for the Midwest, East and South in the 11- to 15-day forecast.
About 50% of U.S. households use gas for heating, data show from the EIA, a unit of the Energy Department.
A 30-day outlook published by MDA last week suggested that U.S. cumulative heating degree days, a measure of weather-driven gas demand, will rise to 655 in March, the most for the month since 1999, Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in an e-mail yesterday.
Viswanath expects gas inventories to drop to 1.92 trillion cubic feet at the end of March, when the heating season winds down, 5% lower than her previous estimate of 2.021 trillion. A widening year-over-year supply deficit will support cash-market prices, which may “prevent a seasonal selloff in futures,” she said.
U.S. gas production in December fell for the first time in four months, capping the slowest annual growth rate in three years, according to the monthly EIA-914 report on Feb. 28. Output slipped 0.7% to 82.57 billion cubic feet a day as operators in Louisiana, Texas and the Gulf of Mexico shut wells. Production rose 0.6% from December 2011.
The boom in oil and natural gas output helped the U.S. meet 84% of its energy needs in the first 11 months of last year, government data show. If the trend continued through 2012, it will be the highest level of self-sufficiency since 1991.