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Natural Gas Futures Advance on Forecasts of Cooler Weather

Oct. 31 (Bloomberg) -- Natural gas capped a second monthly gain in New York as Sandy drew wintry weather into the Midwest and East Coast, boosting demand for heating fuels.

Gas closed little changed after rising as much as 2.4 percent. The Great Lakes region and mid-Atlantic may see below-normal temperatures over the next five days, according to Commodity Weather Group LLC. The Atlantic superstorm left more than 8.2 million customers without power from Maine to North Carolina, the Energy Department said yesterday.

“The storm is creating an interesting dynamic where it sucked cold air down from Canada and brought it to places a little early this year,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “You’ve got some cold air in gas-consuming areas and at the same time you have power outages in New York and the coastal areas.”

Natural gas for December delivery increased 0.1 cent to settle at $3.692 per million British thermal units on the New York Mercantile Exchange. Gas is up 24 percent this year and rose 11 percent this month.

Nymex floor trading opened today after being shut for two days because of Sandy.

Options Trading

April $2.00 puts were the most active options on the exchange. They were unchanged at 0.1 cent on volume of 1,000 lots at 3:26 p.m.

The low in New York on Nov. 3 may be 38 degrees Fahrenheit (3 Celsius), 7 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Cleveland may be 33 degrees, 10 below the usual reading.

About 50 percent of U.S. households use gas for heating, according to the Energy Department.

Consolidated Edison, which owns New York’s utility, said the lights may remain off for four days in areas of Brooklyn and Manhattan and as long as a week in other parts of the city as the company deals with the worst storm in its history. ConEd had 802,318 customers without power as of 3:03 p.m., according to the utility’s website.

The coming U.S. winter will probably be cooler than a year ago, boosting demand for heating fuels such as natural gas, a panel of forecasters said Oct. 18.

Winter Outlook

While December will be warmer than normal, temperatures will drop through February, increasing natural gas use by 13 percent over the same period from last year, Commodity Weather Group LLC President Matt Rogers said during the panel discussion at Earth Networks Inc.’s seventh annual energy weather seminar in New York.

The U.S. winter, measured by meteorologists from Dec. 1 to Feb. 28, may be 21 percent cooler than last year in terms of natural gas-weighted heating degree days, Rogers said.

An Energy Department report scheduled for release at 10:30 a.m. tomorrow in Washington may show gas stockpiles rose 67 billion cubic feet last week to 3.91 trillion, according to the median of 12 analyst estimates compiled by Bloomberg. The five-year average gain for the week is 57 billion. Last year, supplies rose 82 billion during the same period.

Gas inventories totaled 3.843 trillion cubic feet in the week ended Oct. 19, 7 percent above the five-year average. The surplus to the average is down from 61 percent on March 30. U.S. storage capacity is about 4.239 trillion, Energy Department data show.

Energy Needs

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

Next month, natural gas futures may post their first monthly decline since August after beginning to form a price pattern called an evening star, according to technical analysis by Kase & Co.

An evening star is a candlestick formation showing that a contract advanced in one month, traded above that month’s settlement within a narrower range in the following month and then declined.

“The monthly evening star is a bearish candlestick formation,” said Dean Rogers, an analyst with Kase in Albuquerque, New Mexico. “I am looking for the corrective move down to continue in the near term.”

Gas futures volume in electronic trading on the Nymex was 207,565 as of 3:04 p.m., compared with the three-month average of 389,000. Volume was 183,566 yesterday. Open interest was 1.18 million contracts. The three-month average is 1.13 million.

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

To contact the reporters on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net 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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