Natural Gas Futures Gain on Outlook for Cooler Weather

Natural gas futures gained for a second day in New York as cooler U.S. weather may spur demand for the heating fuel.

Temperatures will be below normal in the Midwest through the Northeast over the next five days, according to MDA Weather Services. Readings will be seasonal in the region next week before dipping again from Sept. 25 through Sept. 29. A record amount of gas has been injected into storage since March during an unusually mild summer.

“These people are getting ready for winter,” said Santiago Diaz, energy trading associate at FCStone Latin America LLC in Miami. “If the chill starts to settle in and temperatures start to drop, then injections will slow down.”

Natural gas for October delivery rose 7.4 cents, or 1.9 percent, to settle at $3.931 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 37 percent above the 100-day average at 3:27 p.m. Prices have climbed 6.9 percent from a year ago.

Forecasts for the eastern U.S. turned cooler for late September, a contrast to above-normal temperatures sweeping the western states over the next two weeks, said MDA in Gaithersburg, Maryland.

The low reading in Manhattan on Sept. 23 will drop to 48 degrees Fahrenheit (9 Celsius), 10 below normal, and six days later Chicago’s low will be 42, 10 below average, according to AccuWeather Inc. in State College, Pennsylvania. The high in Los Angeles tomorrow will be 96 degrees, 13 above normal.

Heating Demand

Gas gained on prospects for “a cold snap for the last week of September, which would provide some significant heating demand in most of the country,” Aaron Calder, senior market analyst at Gelber & Associates in Houston, said in a note to clients today. Prices “could drop rapidly” if winter heating demand fails to show up as production climbs, he said.

Chevron Corp. said that most of the natural gas production has been rerouted after a Sept. 13 accident at an offshore Louisiana pipeline killed a contractor.

Two other contractors received minor injuries and were discharged from a hospital after treatment, Chevron spokesman Gareth Johnstone said in an e-mailed statement. The workers were performing routine maintenance. The pipeline platform has been shut and minimal production has been disrupted, according to the company.

Henry Hub

“We don’t flow that much gas through Henry Hub and from what we can see from the pipeline receipts, this accident doesn’t appear to impact total regional production,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York.

Gas futures appear to be staging another attempt at an end-of-season rally on technical buying after prices failed to break below the support of $3.75 per million Btu late last week, she said.

Gas stockpiles have expanded by 1.979 trillion cubic feet from an 11-year low in March to 2.801 trillion cubic feet on Sept. 5, the most for the period in 20 years of U.S. Energy Information Administration data. A supply deficit to the five-year average has narrowed to 14 percent from a record 55 percent in March.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE