Natural gas futures rose the most in four months on predictions for unusually cold weather that would stoke demand for the heating fuel and reduce stockpiles.
Forecasts turned colder over the weekend, with below-normal temperatures blanketing the eastern half of the U.S. from Nov. 8 through Nov. 17, according to MDA Weather. By the end of last winter, the coldest since 1982 based on heating demand, gas inventories were a record 55 percent below average after beginning the season at a small surplus. Gas jumped to $6.493 per million British thermal units on Feb. 24, a five-year high.
“The forecasts are reinforcing the risk of what could happen to stockpiles during the winter,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Traders are a little leery, given what happened last year.”
Natural gas for December delivery rose 17.3 cents, or 4.5 percent, to $4.046 per million Btu on the New York Mercantile Exchange, the highest settlement since Sept. 30 and biggest one-day gain since June 12. Volume for all futures traded was 67 percent above the 100-day average at 2:41 p.m. Prices dropped to $3.541 on Oct. 28, the lowest since last November, before ending last week up 6.9 percent.
“The market is rebalancing after reaching an 11-month low,” McGillian said. “It’s inevitable that traders on the short side of the market would start to get cold feet as it gets closer to winter.”
Net-long wagers on U.S. natural gas dropped 41 percent in the week ended Oct. 28 to 19,686 contracts, the least since March 2012, according to the Commodity Futures Trading Commission’s Oct. 31 Commitments of Traders report. The measure includes an index of four contracts adjusted to futures equivalents.
The low in New York on Nov. 12 may be 31 degrees Fahrenheit (minus 1 Celsius), 11 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago temperatures may drop to 27 degrees, 9 lower than usual.
About 49 percent of U.S. households use gas for heating, data from the U.S. Energy Information Administration show. The agency is the energy department’s statistical arm.
“As of Friday’s close, we have switched our daily bias from neutral to bullish,” Stephen Schork, the president of Schork Group Inc., a consultant in Villanova, Pennsylvania, said in an e-mailed report today.
Gas stockpiles were 8.2 percent below the five-year average in the week ended Oct. 24, the biggest deficit for the time of year since at least 2005. Inventories totaled 3.48 trillion cubic feet as of Oct. 24, compared with 3.774 trillion the same time last year, EIA data show.
Gas demand may rise 1.6 percent to average 72.5 billion cubic feet a day this year, with the industrial sector leading growth, the agency said Oct. 7 in its monthly Short-Term Energy Outlook report.