Natural gas futures rose for the third time in four days on signs that the U.S. economy is continuing to recover from the worst recession since the 1930s and as colder-than-usual weather spurred heating-fuel use.
U.S. imports climbed 3.1 percent in March, led by purchases of crude oil and cars, and exports increased 3.2 percent, a Commerce Department report today showed. The gains signaling demand may strengthen for gas from industrial users. Use of the fuel by factories, chemical plants and steel mills accounts for about 29 percent of consumption. “It gives bulls something to grab hold of, and they haven’t had a lot to grab hold of recently,” said Brad Florer, a trader at Kottke Associates Inc., a commodity futures broker in Louisville, Kentucky. “That, coupled with the stock market rally, brought some fresh buying in here.”
Natural gas for June delivery rose 15.3 cents, or 3.7 percent, to settle at $4.284 per million British thermal units on the New York Mercantile Exchange. Gas has dropped 23 percent this year.
The Standard & Poor’s index of 500 stocks was 1.3 percent higher at 1,170.19.
Colder-than-normal weather in the Northeast late last week and early this week spurred enough demand to reduce injections of gas into storage this week, which will be reflected in an Energy Department report on May 20, said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston.
“In the near term, this will obviously provide some support for prices,” Viswanath said. “It’s a temporary event. It’s still safer to sell the rallies than to buy on these short- term, fading constructive events.”
U.S. gas inventories gained 83 billion cubic feet in the week ended April 30 to 1.995 trillion cubic feet, the Energy Department said last week. Supplies were 19 percent above the five-year average.
The Energy Department’s next supply report, due tomorrow, may show that stockpiles increased by 102 billion cubic feet in the week ended May 7, based on the median of 18 analyst estimates compiled by Bloomberg. The five-year average gain is 84 billion.
Cash prices have been strong this week on the boost in heating demand for gas, said Biliana Pehlivanova, a natural gas analyst with Barclays Capital Inc. in New York.
Prices this week at Henry Hub in Erath, Louisiana, have risen 6.8 percent to $4.1776 per million Btu, according data compiled by Bloomberg. In the long term, the market is watching production and rig count, she said.
Rigs drilling for natural gas fell by five last week to 953, the lowest level in five weeks, according to data published May 7 by Baker Hughes Inc. The count had risen for 16 consecutive weeks before dropping in the week ended April 23.
“The market is focusing on the trajectory of the rig count, and we have seen some signs of stabilization,” Pehlivanova said. Those signs indicate that the rig count may begin to decline earlier than estimated, she said.
Technical analysis signaled higher prices in the days ahead. Gas traded above its 10- and 40-day moving averages, an active buy signal, said Mike Fitzpatrick, vice president of energy for MF Global in New York. Without news on supply and demand, prices will be trapped in a band between $4.81 and $4.386 per million British thermal units, he said.
“You’re going to need something of real fundamental import to blast it out one side or another because right now the fundamentals are so poor,” Fitzpatrick said.
The fuel is trading around a technical “pivot point” of $4.16 per million Btu, Fitzpatrick said.
“You want to be long above that pivot, and short below it,” he said.
Prices need to rise above resistance at $4.33 to $4.38 per million Btu to signal that the April 1 low of $3.81 is a “major bottom in an advance,” according to a technical analysis today from Peter Beutel at Cameron Hanover Inc. in New Canaan, Connecticut.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 2.36 cents, or 0.6 percent, to $4.1776 per million Btu, according to data compiled by Bloomberg.
Gas futures volume in electronic trading on the Nymex was 273,079 as of 3 p.m., compared with a three-month daily average of 231,000. Volume totaled 225,084 yesterday. Open interest was 868,994 contracts, compared with the three-month average of 840,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
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