Natural gas futures rose the most in two weeks as reports indicating that the U.S. economy is improving signaled stronger demand for the factory fuel.
Initial jobless claims fell by 14,000 to 460,000 in the week ended May 22, the Labor Department said today. The number of people receiving unemployment insurance and those getting extended payments declined. Gas dropped briefly after an Energy Department report showed a bigger-than-forecast supply gain.
“Gas snapped right back off a bad injection number,” said Tom Orr, director of research at Weeden & Co., a brokerage in Greenwich, Connecticut. “The economic data continues to be good. It’s a better psychological environment for gas.”
Natural gas for July delivery rose 11.5 cents, or 2.8 percent, to settle at $4.294 per million British thermal units on the New York Mercantile Exchange, the biggest one-day increase since May 12. Gas fell as low as $4.154 after the report was released at 10:30 a.m. Prices have declined 23 percent this year.
U.S. supplies rose 104 billion cubic feet the week ended May 21 to 2.269 trillion cubic feet, the Energy Department said. Analysts forecast a gain of 100 billion, based on the median of 25 estimates in a Bloomberg survey.
The five-year average inventory gain for the week is 94 billion cubic feet. The surplus to the five-year average narrowed to 16.3 percent from 16.6 percent in last week’s report.
“What you’re seeing is a lot of risk coming into the market again,” said Chris Jarvis, president of Caprock Risk Management in Hampton Falls, New Hampshire. “The news overseas of China not selling European debt set the stage for a major rally across the board, and money is being put to work in the market today.”
China’s State Administration of Foreign Exchange said Europe will continue to be “one of the major markets for investing China’s exchange reserves.”
Traders were also reacting to a forecast today from the National Oceanic and Atmospheric Administration that predicted one of the most active hurricane seasons on record, Jarvis said.
The Atlantic hurricane season, which begins next week and runs through November, may have 14 to 23 named storms, according to the forecast. Eight to 14 of those storms are expected to become hurricanes and three to seven are forecast to become major systems with winds of at least 111 miles (178 kilometers) per hour.
During years of high activity, the Gulf of Mexico usually sees at least one named storm, according to NOAA. In 95 percent of those seasons, the region has had two. The Gulf is home to about 30 percent of U.S. oil and 12 percent of U.S. natural gas production, according to the Energy Department.
“The market is realizing that based on fundamentals, we could be trading at $3,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “But with the recovery in front of us, and demand being created, and hurricane season starting, that’s what’s holding this together.”
The jobless claims, while not down as much as forecast, are heading in the right direction, Orr said. Investors now are waiting to see the rig count begin to decline, he said.
The number of natural-gas rigs climbed in the week ended May 21 by 18, or 1.9 percent, to 969, the biggest increase since the week ended March 5, according to a Baker Hughes Inc. report. The rig total was four below the one-year high of 973 set on April 16. The next report is due tomorrow.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 3.4 cents, or 0.8 percent, to $4.2242 per million Btu, according to data compiled by Bloomberg.
Gas futures volume in electronic trading on the Nymex was 169,480 as of 2:47 p.m., compared with a three-month average total of 238,000. Volume was 204,731 yesterday. Open interest was 836,934 contracts, compared with the three-month average of 852,000. The exchange has a one-business-day delay in reporting open interest and full volume data.