May 21 (Bloomberg) -- Natural gas in New York advanced as crude oil surged above $130 a barrel for the first time and the dollar weakened against the euro.

Oil touched $130.47 a barrel in early New York Mercantile Exchange trading on speculation supply constraints will persist. The dollar fell for a second day after an index tracking German business confidence unexpectedly rose.

``Traders decided to get back into the business of buying gas'' based on the commodity's value relative to crude oil, said Peter Beutel, president of energy analyst Cameron Hanover Inc. in New Canaan, Connecticut.

Natural gas for June delivery rose 12.1 cents, or 1.1 percent, to $11.486 per million British thermal units at 9:41 a.m. in New York Mercantile. The contract is 53 percent higher so far this year..

Crude oil for July delivery rose 40 cents to $129.47 a barrel in New York. The futures have gained 35 percent this year.

Yesterday, as crude surged, gas traders ``threw in the towel'' and followed oil, which climbed 1.6 percent to close at a record $129.07 a barrel, said Beutel. Gas surged 3.8 percent.

Crude gained 1.8 percent on May 16 and 0.6 percent on May 19. Gas traders tried to ignore the advance, pushing gas lower, said Beutel. Gas fell 2.7 percent on May 16 and 1.3 percent on May 19.

Gas buyers reacted to the changing ratio between crude and gas prices, said Beutel. The ratio widened to 11.6-to-1 on May 19, the biggest since March 18, prompting buying, said Beutel. Traders had kept it between 10-to-1 and 11-to-1 since mid March, with an average for the year of 11.12-to-1, he said in a note.

Price Ratios

The ratio today is about 11.31-to-1, suggesting gas would need to move to about $11.63 per million Btu to get back to the average for the year.

The dollar slid to $1.5744 per euro at 9:40 a.m. in New York from $1.5647 yesterday.

Returns from investing in commodities, especially energy, have surged this year as investors sought alternatives to stocks. Natural gas has gained 52 percent and oil is 34 percent higher.

Stockpiles of natural gas rose 87 billion cubic feet for the week ended May 16, according to the median of 12 analyst estimates compiled by Bloomberg. The average change for the same week of the year over the past five is an increase of 91 billion cubic feet, according to U.S. Energy Department data.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.

Last Updated: May 21, 2008 09:43 EDT