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Natural Gas Futures Advance as Storm Threatens Gulf of Mexico

Oct. 1 (Bloomberg) -- Natural gas futures climbed in New York for the fourth time in five days on speculation that a tropical weather system will enter the Gulf of Mexico, causing pipelines and platforms to shut.

Gas gained 1.4 percent. An area of low pressure over the western Caribbean Sea has a 50 percent chance of becoming a tropical cyclone over the next five days, the National Hurricane Center in Miami said in a 2 p.m. outlook. The storm will move over the southern Gulf later this week, according to the hurricane center.

“The bottom line for the market is the concern that this storm could be a problem maker,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Traders are looking to take prices a little higher.”

Natural gas for November delivery rose 4.9 cents to settle at $3.609 per million British thermal units on the New York Mercantile Exchange. Trading volume was 3.4 percent above the 100-day average at 2:52 p.m. Prices have advanced 7.7 percent this year.

The discount of November to December futures narrowed 1.3 cents to 15.5 cents. November gas traded 25.3 cents below the January contract, compared with 27.1 cents yesterday.

November $3.40 puts were the most active options in electronic trading. They were 1.5 cents lower at 3.9 cents per million Btu on volume of 640 at 2:53 p.m. Puts accounted for 47 percent of trading volume. Implied volatility for November at-the-money options was 30.3 percent at 3:13 p.m., compared with 30.11 percent yesterday.

Gulf Gas

The Gulf of Mexico will account for 5.6 percent of U.S. gas production this year, down from 14 percent in 2007, according to the Energy Information Administration. The region’s share of gas output has declined amid rising supplies from shale formations across the U.S.

“The track will carry the storm near offshore platforms responsible for some 4 billion cubic feet a day in natural gas production and so will need to be monitored,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a note to clients today.

Commodity Weather Group LLC in Bethesda, Maryland, said temperatures will be normal or below average in the Midwest and West from Oct. 6 through Oct. 10. The low in Minneapolis on Oct. 9 may be 36 degrees Fahrenheit (2 Celsius), 6 less than usual, according to AccuWeather Inc. in State College, Pennsylvania.

Cool Weather

The low in Denver may be 34 degrees, 5 lower than normal, AccuWeather data show. About 50 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.

A government report scheduled for release Oct. 3 may show gas stockpiles rose by 97 billion cubic feet last week, compared with a five-year average gain of 82 billion, according to the median of five analyst estimates compiled by Bloomberg. Supplies rose by 77 billion in the same period last year.

The EIA said yesterday it will release the report as usual this week as the U.S. government shutters offices because of a budget impasse in Congress.

Gas inventories totaled 3.386 trillion cubic feet in the seven days ended Sept. 20, 0.9 percent above the five-year average and 5 percent below last year’s supplies for that week, EIA data show.

The number of rigs drilling for gas in the U.S. fell by 10 last week to 376, according to data released Sept. 27 by Baker Hughes Inc. in Houston. The total is down 13 percent this year.

The U.S. met 87 percent of its own energy needs in the first six months of 2013, on pace to be the highest annual rate since 1986, EIA data show.

To contact the reporter on this story: 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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