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Natural Gas Gains a Fourth Day on Colder Weather in Eastern U.S.

Nov. 8 (Bloomberg) -- Natural gas rose for a fourth day in New York on speculation that falling temperatures will lift demand to heat homes and businesses.

Futures rose as much 1.1 percent as colder-than-normal weather will blanket Chicago to New York through Nov. 17, according to the U.S. Climate Prediction Center in College Park, Maryland. About 49 percent of U.S. households use natural gas for heating, government data show.

“Temperatures are getting cooler and that’s something that’s giving the market support,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “There’s some waffling as to how cold it will get. Because of that, traders are nervous going into the weekend.”

Natural gas for December delivery rose 4 cents to settle at $3.559 per million British thermal units on the New York Mercantile Exchange. Trading volume was 28 percent below the 100-day average. Prices have climbed 6.2 percent this year and gained 1.3 percent this week, capping the first weekly increase in a month.

The discount of December to January futures expanded 0.1 cents to 5.7 cents. March gas traded 1.5 cents above the April contract, compared with 1.3 cents yesterday.

February $5.10 calls were the most active options in electronic trading, rising 0.1 cent to 0.8 cent per million Btu on volume of 2,861 at 2:51 p.m. February $2.70 puts fell 0.1 cent to 0.7 cent on volume of 2,860. Calls accounted for 54 percent of trading.

Supply Report

Gas inventories rose 35 billion cubic feet in the week ended Nov. 1 to 3.814 trillion cubic feet, the Energy Information Administration said in a weekly report yesterday. The five-year average gain for the week is 36 billion.

A surplus to five-year average storage levels slipped to 1.5 percent from 1.6 percent the previous week. Supplies were 2.9 percent below year-earlier inventories, compared with 3.1 percent in last week’s report.

Flynn said ample inventories are making gas more attractive than other heating fuels.

“The glut of supply is really pressuring coal because it’s so cheap,” he said.

The low in Chicago on Nov. 11 may be 27 degrees Fahrenheit (minus 3 Celsius), 10 less than usual, according to AccuWeather Inc. in State College, Pennsylvania.

Weather concerns are outweighing the oversupply, said Victor Zevallos, an energy trader at FCStone Latin America LLC in Miami.

“It’s just weather-related,” he said. “It has a tendency to go higher because of the seasonality.”

The number of rigs drilling for natural gas in the U.S. rose by 5 to 365 last week, data released today by Baker Hughes Inc. in Houston showed. The total is down 12 percent from a year ago.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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