Natural gas futures rose to a 21-month high in New York, capping the ninth weekly gain in a record streak, on speculation that forecasts of unusually cold weather next week will buoy U.S. heating-fuel demand.
Gas increased 0.2 percent after MDA Weather Services in Gaithersburg, Maryland, predicted below-normal temperatures in the central and southeast U.S. states through April 28. Prices have surged 32 percent this year as an unusually cold start to spring spurred heating-fuel demand and created a record supply deficit. Gas fell to a 10-year low of $1.902 per million British thermal units one year ago today after stockpiles ballooned during the fourth-warmest U.S. winter on record.
“Fundamentally, the weather is still siding with the bulls,” said Brad Florer, a trader at Kottke Associates LLC in Louisville, Kentucky. “It’s chilly here today. We are expecting below-normal temperatures for a while. The storage situation continues to favor the bulls.”
Natural gas for May delivery rose 0.7 cent to $4.408 per million Btu on the New York Mercantile Exchange, the highest settlement since July 20, 2011. The futures climbed 4.4 percent this week, according to data compiled by Bloomberg. Trading volume was 15 percent below the 100-day average at 2:48 p.m.
The discount of May contracts to October narrowed 0.5 cent to 7.3 cents. The discount of October to January narrowed 0.2 cent to 27.8 cents.
June $4.55 calls were the most active gas options in electronic trading. They were 0.4 cent lower at 13.7 cents per million Btu on volume of 840 contracts as of 3:41 p.m. Calls accounted for 60 percent of options volume.
Implied volatility for at-the-money gas options expiring in June was 31.85 percent at 3:30 p.m., down from 32.51 percent yesterday.
The temperature in Chicago on April 23 may be 34 degrees Fahrenheit (1 Celsius), 10 lower than the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. Dallas may 13 below normal at 45 degrees.
About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the statistical arm of the Energy Department. Gas consumption typically slumps after the winter heating season and before hot weather boosts demand for electricity to run air conditioners.
Gas inventories rose 31 billion cubic feet in the week ended April 12 to 1.704 trillion, EIA data showed yesterday. Analyst estimates compiled by Bloomberg and a survey of Bloomberg users predicted a gain of 38 billion. Supplies were 4.2 percent below the five-year average, compared with 3.8 percent the previous week.
The stockpile increase, the first since Dec. 7, was smaller than the five-year average gain for the week of 39 billion cubic feet.
The number of rigs drilling for gas rose by two this week to 379, the most in three weeks, Baker Hughes Inc. said today. The count has fallen 12 percent this year.
Gas production will climb to an all-time high this year as gains from shale deposits such as the Marcellus in the Northeast make up for declines from dry-gas wells elsewhere, according to the EIA. U.S. marketed output will average 69.33 billion cubic feet a day, up 0.3 percent from last year’s average of 69.12 billion, the government said in its April 9 Short-Term Energy Outlook.
The boom in oil and natural gas output helped the U.S. cut its reliance on imported fuel. The U.S. produced 84 percent of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88 percent in December, the highest since February 1987.