Natural gas futures jump to five-month high

Cold weather in lower 48 means higher demand

Natural gas futures climbed to a five-month high on forecasts for colder weather that would boost demand for the heating fuel and deplete inventories.

Gas gained as much as 1.4% as Commodity Weather Group LLC said the weather may be colder than normal across most of the lower-48 states from Dec. 7 through Dec. 11. A government report today showed that gas inventories slid 13 billion cubic feet in the week ended Nov. 22 to 3.776 trillion cubic feet, matching analyst estimates compiled by Bloomberg.

“The storage number was more or less within expectations, but it’s a pretty good withdrawal and the weather reports are looking very bullish,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The market is looking ahead to an even bigger withdrawal next week.”

Natural gas for January delivery rose 3 cents, or 0.8%, to $3.894 per million British thermal units at 1:43 p.m. on the New York Mercantile Exchange. Volume was 16% below the 100-day average. Prices reached $3.918, the highest intraday price since June 20. The futures have advanced 16% this year.

The stockpile decrease was smaller than the five-year average decline for the period of 15 billion cubic feet, department data show. A surplus to the five-year average widened to 0.5% from 0.4% the previous week. Supplies were 2.6% below year-earlier inventories, compared with 2.3% in last week’s report.

Colder weather

The low in Chicago on Dec. 7 may be 15 degrees Fahrenheit (minus 9 Celsius), 10 less than average, according to AccuWeather Inc. in State College, Penn. Temperatures in Cleveland may fall to 20 degrees, 12 lower than usual.

About 49% of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

The U.S. may have 3.4% 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 said in a Nov. 25 seasonal outlook.

The number of rigs drilling for gas in the U.S. fell by two from last week to 367, according to data released today by Baker Hughes Inc. in Houston. The total is down 14% this year.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome