Natural gas futures rose to a one-year high in New York on speculation that U.S. inventories will drop for the first time this season as below-normal temperatures spur fuel demand.
Gas rose 4.7 percent, the most in six weeks, as a government report on Nov. 15 may show that stockpiles fell 15 billion cubic feet last week to 3.914 trillion, according to Donald Murry, an economist at C.H. Guernsey & Co. in Oklahoma City. That would be the earliest seasonal decline since 2007.
“A withdrawal from inventories would tell the market that winter is already here,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “We’re obviously seeing colder weather than what people remember from the latter part of last year.”
Natural gas for December delivery rose 16.9 cents to $3.739 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Nov. 8, 2011. The futures had their biggest one-day percentage increase since Oct. 1, excluding contract rollover days. Prices are up 4.3 percent from a year ago.
January $3 puts were the most active gas options in electronic trading. They were 0.4 cent lower at 0.4 cent per million Btu on volume of 2,134 contracts as of 2:47 p.m. Puts accounted for 50 percent of options volume.
Today’s rally was triggered after prices rose above key resistance at $3.62 per million Btu, a level that futures had approached several times since early November, Aaron Calder, an analyst at Gelber & Associates in Houston, said in a note to clients today.
Gas climbed above the upper Bollinger band in intraday trading, signaling a decline may be imminent. Some traders use the bands, developed by technical analyst John Bollinger, to judge support and resistance levels based on moving averages.
The five-year average storage change for the seven days ended Nov. 9 is a gain of 17 billion cubic feet. Last year, supplies rose by 20 billion during that week.
Inventories were 6.6 percent above the five-year average in the week ended Nov. 2. The surplus has declined from a six-year high of 61 percent in March. The government’s weekly storage report is due at 10:30 a.m. on Nov. 15 in Washington.
The weather may be colder than normal across most of the eastern half of the U.S. through Nov. 17, according to Commodity Weather Group LLC in Bethesda, Maryland.
The low in Cleveland on Nov. 16 may be 32 degrees Fahrenheit (0 Celsius), 8 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Memphis, Tennessee, may be 38 degrees, 6 lower than the usual reading.
Heating demand in the south-central U.S. may be 20 percent above normal on Nov. 16, according to Weather Derivatives in Belton, Missouri.
About 50 percent of U.S. households use gas for heating, according to the Energy Department.
The coming U.S. winter will probably be colder than a year ago, boosting demand for heating fuels such as natural gas, a panel of forecasters said.
While December will be warmer than normal, temperatures will drop through February, increasing natural gas use by 13 percent over the same period a year earlier, Commodity Weather Group LLC President Matt Rogers said during a panel discussion at Earth Networks Inc.’s seventh annual energy weather seminar in New York Oct. 18.
The U.S. winter, measured by meteorologists from Dec. 1 to Feb. 28, may be 21 percent cooler than last year in terms of natural gas-weighted heating degree days, Rogers said.
Next page: Gas Output, Energy Independence
The U.S. boosted its outlook for 2012 natural gas prices and lowered its forecast for production, according to the Energy Department’s Nov. 6 Short-Term Energy Outlook.
Gas at the benchmark Henry Hub in Erath, Louisiana, will average $2.77 per million British thermal units, up from the previous estimate of $2.71, the department said.
Marketed gas production will average 68.84 billion cubic feet a day this year, up 4 percent from last year, according to the Nov. 6 report from the department’s Energy Information Administration.
“EIA expects some small declines in production in the coming months, related to recent drops in the rig count,” the department said in the report.
The number of rigs drilling for gas in the U.S. fell by 11 to 413 in the week ended Nov. 9, according to Baker Hughes Inc. in Houston. The rig count has dropped 49 percent this year.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.
Gas futures volume in electronic trading on the Nymex was 338,237 as of 2:44 p.m., compared with the three-month average of 365,000. Volume was 248,229 yesterday. Open interest was 1.15 million contracts. The three-month average is 1.14 million.
The exchange has a one-business-day delay in reporting full volume and open interest data.