Natural Gas Futures Jump on Outlook for Colder November

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By Christine Buurma

Natural gas futures surged the most in five weeks in New York on forecasts for unusually cold weather that would stoke demand for the heating fuel and reduce stockpiles.

Forecasts turned colder over the weekend, with below-normal temperatures blanketing the eastern half of the U.S. from Nov. 8 through Nov. 17, according to MDA Weather Services in Gaithersburg, Maryland. By the end of last winter, the coldest since 1982 based on heating demand, gas inventories were a record 55 percent below the five-year average after beginning the season at a small surplus. Gas jumped to $6.493 per million British thermal units on Feb. 24, a five-year high.

“The forecasts are reinforcing the risk of what could happen to stockpiles during the winter,” said Gene McGillian, an analyst and broker at Tradition Energy in StamfordConnecticut. “Traders are a little leery, given what happened last year.”

Natural gas for December delivery rose 15.6 cents, or 4 percent, to $4.029 per million British thermal units at 9:15 a.m. on the New York Mercantile Exchange, the biggest one-day gain since Sept. 29. Gas climbed to $4.065 in earlier trading, the highest intraday price since Oct. 1. Volume for all futures traded was more than triple the 100-day average. Gas is up 14 percent from a year ago.

The low in New York on Nov. 12 may be 31 degrees Fahrenheit (minus 1 Celsius), 11 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago temperatures may drop to 32 degrees, 5 lower than usual.

Bullish Bias

About 49 percent of U.S. households use gas for heating, data from the U.S. Energy Information Administration show. The agency is the energy department’s statistical arm.

“As of Friday’s close, we have switched our daily bias from neutral to bullish,” Stephen Schork, the president of Schork Group Inc., a consultant in Villanova, Pennsylvania, said in an e-mailed report today.

Gas stockpiles were 8.2 percent below the five-year average in the week ended Oct. 24, the biggest deficit for the time of year since at least 2005. Inventories totaled 3.48 trillion cubic feet as of Oct. 24, compared with 3.774 trillion the same time last year, EIA data show.

Gas demand may rise 1.6 percent to average 72.5 billion cubic feet a day this year, with the industrial sector leading growth, the agency said Oct. 7 in its monthly Short-Term Energy Outlook report.

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