The cold weather has disrupted gas output by causing so- called freeze-offs, when water in the wells crystallizes and blocks the flow of hydrocarbons, according to Mike Tran, an analyst at CIBC World Markets in New York. Supplies have dropped by about 1.5 billion to 1.8 billion cubic feet a day, Tran said.
Gross gas production in the lower-48 states slid 0.8 percent in September to 73.91 billion cubic feet a day from a revised 74.49 billion the previous month, the EIA said Dec. 6 in a monthly report.
The low in Chicago on Dec. 25 may be 13 degrees Fahrenheit (11 Celsius), 7 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. The temperature in New York may fall to 22 degrees, 7 below average.
About 49 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.
The U.S. may have 3.4 percent more heating-degree days, a measure of weather-driven energy demand, from November to March compared with the same period last year, Commodity Weather Group LLC in Bethesda, Maryland, said in a Nov. 25 seasonal outlook.
Cutting Shorts
“If temperatures stay below normal, traders are going to continue to reduce their short positions in natural gas,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The next storage withdrawal is probably going to be a whopper.”
Net-long bets on four U.S. natural gas contracts held by money managers climbed by 82,574 futures equivalents to 271,068 in the week ended Dec. 10, according to the CFTC. Bearish bets slid by 42,470, while long positions rose by 40,104.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
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