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Natural Gas Rises as Forecasts Point to Cold Weather Ahead

02/22/2013 | 05:10pm US/Eastern

--Natural-gas prices gain 1.4% to $3.291/MMBtu

--Forecasters see colder temperatures in early March

--U.S. stockpiles 18% above five-year average level

(Adds price chart.)

   By Jerry A. DiColo 

NEW YORK--Natural-gas futures rose Friday as forecasts showed colder weather ahead that could raise gas-fired heating demand.

Natural gas for March delivery settled 4.5 cents, or 1.4%, higher at $3.291 a million British thermal units on the New York Mercantile Exchange.

Futures gained as weather outlooks pointed to a colder-than-average start to March. Private forecaster WSI Energycast said cold weather will descend on the eastern half of the country over the next 11 to 15 days.

Jim Ritterbusch, head of trading advisor Ritterbusch and Associates, said forecasts are supporting prices now that "some below-normal temps across much of the eastern half of the U.S. are now stretched into the second week of March."

Natural-gas usage typically increases when temperatures drop, as roughly half of U.S. homes use gas-fired heating. Many more use electric heating generated at gas-fired utilities.

The new forecasts helped gas futures hold in a trading range centered around $3.30/MMBtu that has contained prices for the past month. But Thursday's stockpile report, which showed a smaller-than-average withdrawal from gas storage, is keeping hopes of higher prices in check, said analysts and investors.

Barclays analysts said prices will likely hold relatively flat "since the winter is almost over" and colder weather won't be able to make a big dent in U.S. gas stockpiles.

"Since we expect storage to end March at a comfortable level, rather than the 60% full status last year, we expect spring price swings to be reasonably controlled by fundamental factors," Barclays said in a research report.

Thursday, the U.S. Energy Information Administration said domestic gas stockpiles fell by 127 billion cubic feet last week. While the drop was larger than analysts had anticipated, it came in well below the five-year average drop for the same week. Total inventories now stand at 2.4 trillion cubic feet, 18% above the five-year average level for the same period.

"We have 2.4 tcf gas in storage with what might be a month of withdrawals left. It's looking more and more clear we'll end withdrawal season with the second-highest level ever," said Gene McGillian, a broker at Tradition Energy. "When the warm weather hits, we'll see the sellers coming out."

Nymex March         $3.291           +4.5c 
Nymex April         $3.349           +5.1c 
Nymex May           $3.406           +4.6c 
CASH HUB           RANGE            PREVIOUS DAY 
Henry Hub        $3.25-$3.3275       $3.27-$3.31 
Transco 65       $3.275-$3.36        $3.275-$3.36 
Tex East M3      $3.52-$3.65         $3.65-$3.725 
Transco Z6       $3.75-$4.55         $4.00-$6.00 
SoCal            $3.425-$3.58        $3.445-$3.58 
El Paso Perm     $3.18-$3.27         $3.2435-$3.30 
El Paso SJ       $3.185-$3.30        $3.245-$3.28 
Waha             $3.19-$3.25         $3.245-$3.26 
Katy             $3.20-$3.26         $3.23-$3.30 

Write to Jerry A. DiColo at jerry.dicolo@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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