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Natural-Gas Futures Rise After Jobs Report Signals Increase in Fuel Demand
Natural gas futures rose the most in seven weeks after companies added more jobs than forecast in August, raising speculation that fuel demand will rebound as the U.S. recovers from the deepest recession since the 1930s.
The fuel gained as private payrolls climbed 67,000, after a revised 107,000 gain in July, Labor Department figures showed today. The median estimate of economists surveyed by Bloomberg News called for a gain of 40,000. Traders project that natural- gas demand will rise because it’s cheaper than coal, said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
“The natural gas market is reacting to improving fundamentals,” Larry said. “Natural gas has been so undervalued against coal that demand and prices are bound to increase.”
Natural gas for October delivery rose 18.8 cents, or 5 percent, to settle at $3.939 per million British thermal units on the New York Mercantile Exchange. Gas rose 7.9 percent this week, the first weekly increase since the end of July.
Overall employment fell 54,000 for a second month and the unemployment rate rose to 9.6 percent as more people entered the labor force, the report showed.
“It’s not a fabulous report, but it’s better than expected,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “That can give the markets a boost, and that’s what we’re seeing today.”
Switching From Coal
Lower natural gas prices will entice electric utilities to switch from coal- to natural gas-fired power plants, bolstering consumption of the fuel, said Kyle Cooper, managing director of research for IAF Advisors in Houston.
“Based on the pipeline flows in the first three days of the month, there’s not a lot of indication of increase in demand,” said Cooper, who predicted prices will fall next week.
Natural gas has dropped 29 percent this year on speculation that stockpiles will approach record highs by the end of October. U.S. gas inventories at the end of October will climb to 3.752 trillion cubic feet, according to the Energy Department. The record is 3.84 trillion in November 2009.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 0.76 cent, or 0.3 percent, to $3.7356 per million Btu on the Intercontinental Exchange.
Gas futures volume in electronic trading on the Nymex was 176,114 as of 2:47 p.m., compared with a three-month average of 262,000. Volume was 226,634 yesterday. Open interest was 817,817 contracts, compared with the three-month average of 807,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net
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