Feb. 23 (Bloomberg) -- Natural gas futures rose, rebounding from the lowest price in more than three months, as forecasts show colder weather, increasing demand for the heating fuel.
Gas rose as much as 1.6 percent as the National Weather Service predicted that temperatures will be below normal in the Northeast and Midwest from Feb. 28 to March 4. Gas also gained as prices failed to break below a key level of $3.82, according to Hamza Khan, an analyst with the Schork Group Inc., a consulting company in Villanova, Pennsylvania.
“We see resistance around the $3.82 area and gas just can’t get any lower than that,” said Khan. “The weather forecast is also providing support.”
Natural gas for March delivery rose 4.3 cents, or 1.1 percent, to $3.91 per million British thermal units at 1:59 p.m. on the New York Mercantile Exchange after dropping to $3.821, the lowest intraday price since Nov. 17. The futures have lost 11 percent this year.
The low temperature in New York on March 2 may be 24 degrees Fahrenheit (4 Celsius), 7 degrees below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 21, 5 degree below normal.
For the period from March 5 to March 9, temperatures will be above normal in the East and South, according to Commodity Weather Group LLC in Bethesda, Maryland.
About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.
Supply Report
The Energy Department may say inventories dropped 83 billion cubic feet in the week ended Feb. 18, according to the median of 18 analyst estimates compiled by Bloomberg. The five- year average decline for the week is 148 billion.
Withdrawals have exceeded 100 billion cubic feet each week since Dec. 3.
“You will see a very lackluster withdrawal tomorrow,” said Cameron Horwitz, an analyst in Houston at Canaccord Genuity. “We are going to exit the winter withdrawal season with very healthy levels of gas in storage, and people continue to expect production to remain very high this year.”
Gas inventories decreased 233 billion cubic feet in the week ended Feb. 11 to 1.911 trillion cubic feet, the Energy Department reported last week.
The decline was bigger than the five-year average drop for the week of 150 billion cubic feet, department data showed. A deficit to the five-year average widened to 6.3 percent from 2.1 percent the previous week.
March Total
Gas inventories may total 1.651 trillion cubic feet by the end of March, down from 1.662 trillion a year earlier, the Energy Department estimated on Feb. 8 in its monthly Short-Term Energy Outlook.
The government “expects near-record-high inventories to continue through most of 2011,” the Energy Department said in the monthly report.
Rising natural gas output is reducing coal demand among power generators, according to Barclays Capital.
If gas supply grows by 1 billion cubic feet a day in 2012, which is about half the pace of supply gains each year since 2005, some 2.3% of coal demand in the electric sector would be displaced, said James Crandell, Biliana Pehlivanova and Michael Zenker, analysts with Barclays Capital in New York and San Francisco, in a note to clients today.