Natural gas jumps 1.5% on unexpectedly big drop in stockpiles
NEW YORK -- Natural gas futures prices settled 1.5% higher Thursday after a U.S government report showed a larger-than-expected decline in supplies.
The U.S. Energy Information Administration reported that 171 Bcf of gas were withdrawn from inventories last week, beating average estimates calling for a drop of 166 Bcf. The drop in storage levels was bigger than the decline of 108 Bcf per year earlier and the five-year average of 140 Bcf.
The robust declines suggest colder weather last week raised demand for natural gas, which is used heavily in the East Coast and Midwest as a home-heating fuel.
"The withdrawal was above consensus, and that gave prices a bit of a bump," said Matt Smith, energy analyst at Schneider Electric.
Natural gas for April delivery on the New York Mercantile Exchange settled 5.2 cents, or 1.5%, higher, at $3.486 MMbtu.
At 2.229 Tcf, inventories were 12% lower than the same week a year ago. The surplus of gas to the five-year average shrank to 16% in the week ended Feb. 22 from 18% a week earlier.
Traders also weighed mixed weather forecasts Thursday for the Midwest and the East Coast. While temperatures in the first two weeks of March will turn warmer then normal, there is still a "cold prevailing pattern," with a few winter storm threats heading into mid-March, said private forecaster Commodity Weather Group.
If the cold weather lingers, that could mean three more triple-digit storage withdrawals in the winter season before the so-called shoulder season, said Kent Bayazitoglu, analyst at Gelber & Associates. Shoulder season begins in April, when winter home-heating demand drops and companies begin storing gas for the start of the next heating season.
Separately, the EIA said in a monthly report that natural-gas output in the lower 48 U.S. states fell 1.1% in December, its largest monthly drop since February 2012. Output declined as oil and gas operators in Louisiana, Texas and the Gulf of Mexico shut in production. Cold weather also froze wells in New Mexico, which reported lower output.
For all of 2012, gas output averaged 72.67 Bcf per day, up 4.4% from a year earlier. Output grew at a slower pace than in 2011, which saw a 7.4% rise.
Dow Jones Newswires