Natural gas futures jumped the most in two weeks in New York as hotter weather spurred demand for the power-plant fuel.
Gas gained 2.2 percent amid forecasts for above-normal temperatures in the West and Northeast through July 16, according to MDA Weather Services in Gaithersburg, Maryland. Cooler weather will give way to higher readings in Texas starting next week. Prices fell in four of the past five weeks as mild weather limited cooling needs.
“The weather is definitely supportive,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “The natural gas contract drifted down to $3.50, it’s just the psychological support. Now we are rebounding up here a little bit with the heat.”
Natural gas for August delivery rose 7.7 cents to settle at $3.654 per million British thermal units on the New York Mercantile Exchange. Trading volume was 30 percent below the 100-day average at 2:41 p.m. Prices have climbed 9 percent this year.
Gas futures slumped 21 percent from the 21-month intraday high of $4.444 on May 1 to a three-month low of $3.526 on June 28 amid above-average weekly supply gains.
The June 28 low provides technical support for prices, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We were on the cusp of bear-market territory by definition and it managed to hold against those levels.”
September $2.70 puts were the most active options in electronic trading. They were down 0.2 cent at 0.4 cent per million Btu on volume of 1,878 at 3:06 p.m. September $4.70 calls, also with volume of 1,878 lots, rose 0.2 cent to 0.8 cent. Puts accounted for 51 percent of trading volume. Implied volatility for at-the-money options expiring in August was 31.46 percent at 3 p.m., compared with 32.39 percent yesterday.
The high temperature in New York City on July 10 will be 94 degrees Fahrenheit (34 Celsius), 10 above average, according to AccuWeather Inc. in State College, Pennsylvania.
Power producers account for 32 percent of gas demand, according to the Energy Information Administration.
U.S. gas inventories probably rose by 74 billion cubic feet in the week ended June 28, based on the median of 18 analyst estimates compiled by Bloomberg. It would be the smallest gain since the week ended April 26, EIA data show. Supplies increased by 41 billion a year earlier, and the five-year average injection for the period is 71 billion.
The government report is scheduled to be released tomorrow at noon, a day earlier than usual because of the July 4 Independence Day holiday.
Stockpiles totaled 2.533 trillion cubic feet in the week ended June 21, 1.2 percent below the five-year average, the EIA said last week. The gap narrowed from 6.2 percent at the end of April. A deficit to year-earlier levels shrank to 17.1 percent from 30.9 percent during the same period.
Supplies will reach 3.813 trillion cubic feet at the end of October, before demand peaks with the next winter-heating season, the EIA predicted in a June 11 report.
“In the past four weeks a succession of notably more bearish inventory builds than expected” has suggested supplies may peak at 3.9 trillion cubic feet before next winter, eliminating the year-over-year storage deficit, said Brison Bickerton, head of strategy at Freepoint Commodities LLC in Stamford, Connecticut.
“The premium of the March price over April has contracted, reflecting the market’s perception of lower risk to winter stocks,” Bickerton said. The spread may widen again with summer heat and hurricanes.
The premium of March gas to April futures was 8.4 cents today compared with this year’s intraday high of 44.9 cents on April 12.