U.S. Gas Futures Rebound After Biggest Drop in Two Weeks

Natural gas futures climbed in New York for the third time in four days as meteorologists predicted above-normal temperatures that would stoke demand for power generation.

Gas gained 0.8 percent as Commodity Weather Group LLC in Bethesda, Maryland, said the weather may be hotter than usual in most of the lower-48 states through Sept. 9. The high in Houston on Aug. 31 may be 96 degrees Fahrenheit (36 Celsius), 5 more than average, according to AccuWeather Inc. in State College, Pennsylvania.

“This heat wave is giving the market a boost,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “Power demand has been a lot higher than anticipated and buyers are creeping into the market.”

Natural gas for September delivery rose 2.8 cents to settle at $3.513 per million British thermal units on the New York Mercantile Exchange. Trading volume was 47 percent below the average at 2:45 p.m. Prices are up 4.8 percent this year.

The discount of September to October futures widened 0.4 cent to 4 cents. October gas traded 36.7 cents below the January contract, compared with 37.8 cents on Aug. 23.

September $3.50 puts were the most active options in electronic trading. They were 3.5 cents lower at 2.3 cents per million Btu on volume of 571 at 2:47 p.m. Puts accounted for 63 percent of trading volume. Implied volatility for October at-the-money options was 31.73 percent at 2:45 p.m., compared with 31.1 percent on Aug. 23.

Chicago Weather

The high in Chicago on Aug. 31 may be 88 degrees Fahrenheit, 8 above average, AccuWeather data show. Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.

Gas inventories totaled 3.063 trillion cubic feet in the week ended Aug. 16, or 1.5 percent above the five-year average, the EIA said. Stockpiles were 7.2 percent below year-earlier supplies.

The EIA lowered its 2013 marketed natural gas production estimate to 69.89 billion cubic feet a day in the Aug. 6 Short-Term Energy Outlook from last month’s forecast of 69.96 billion. Output would be up 1 percent from 2012 to a record as onshore supplies climb.

Inventories may reach 3.8 trillion cubic feet at the end of October, about 130 billion below last year’s level for the time of year, the EIA said.

The number of rigs drilling for natural gas in the U.S. last week fell by one to 387 last week, Baker Hughes Inc. in Houston said. The total has dropped 10 percent this year.

The U.S. met 87 percent of its own energy needs in the first four months of 2013, on pace to be the highest annual rate since 1985, according to EIA data.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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