Natural Gas Rises to Three-Month High on Small Storage Increase

Natural gas futures jumped to the highest price in more than three months after a government report showed a smaller-than-forecast stockpile increase.

Gas rose for the first time in four days after the Energy Department said inventories increased 31 billion cubic feet in the week ended April 22 to 1.685 trillion. Analyst estimates compiled by Bloomberg showed a gain of 38 billion. A separate survey of Bloomberg users showed an increase of 37 billion.

“This is a quite bullish number for this time of the year and it’s mostly because of the hot weather in the South,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “We are getting in a range where supply and demand are more balanced.”

Natural gas for June delivery advanced 16.3 cents, or 3.7 percent, to $4.571 per million British thermal units on the New York Mercantile Exchange, the highest settlement price for a front-month contract since Jan. 24. The percentage gain is the biggest since March 25. Prices have risen 4.2 percent this month.

The five-year average inventory change for the week is an increase of 65 billion cubic feet, department data showed. Stockpiles were 0.6 percent below the five-year average, the first deficit since the week ended Feb. 25.

Stockpiles were 11 percent below levels a year earlier, the widest year-on-year deficit since Aug. 8, 2008.

Southern Heat

Last week’s hot weather in the South and cold weather in the North increased demand for gas for heating and power generation, according to Carl Neill, an energy consultant at Risk Management Inc. in Atlanta.

The weather will be moderating next week, with below-normal temperatures in the U.S. East, Midwest and South from May 3 to May 7, according to Commodity Weather Group LLC in Bethesda, Maryland.

The high in New York on May 6 will be 59 degrees Fahrenheit (15 Celsius), 8 below normal for the day, according to AccuWeather Inc. in State College, Pennsylvania.

Dallas will have a high of 73 degrees on May 3, 8 degrees below normal. The city had a high of 87 degrees on April 24.

Power plants use 30 percent of the nation’s gas supplies, according to the Energy Department. Residential consumers account for about 20 percent.

A drop in nuclear power after severe storms in the South may boost demand for natural gas-powered electricity, Williams said.

U.S. nuclear-power output fell to the lowest level in more than 10 years after the storms, according to a report today from the Nuclear Regulatory Commission and data compiled by Bloomberg.

Nuclear Power

Nuclear power generation nationwide decreased 2,605 megawatts, or 3.6 percent, from yesterday to 70,283 megawatts, or 69 percent of capacity, the lowest level since Oct. 26, 2000, according to the NRC report and Bloomberg data. Twenty-nine of the nation’s 104 reactors were offline.

The Tennessee Valley Authority shut all three reactors at Browns Ferry, located 84 miles (135 kilometers) north of Birmingham on Wheeler Lake, near the Tennessee border, after thunderstorms and high winds damaged offsite power supplies, the NRC said.

Gas futures volume in electronic trading on the Nymex was 378,656 as of 3:01 p.m., compared with the three-month average of 315,000. Volume was 159,107 yesterday. Open interest was 927,600 contracts. The three-month average open interest is 924,000.

The exchange has a one-business-day delay in reporting open interest and full volume data.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE