Natural Gas Futures Rise as Cold May Limit Supply Gains

Natural gas futures capped a weekly gain in New York on concern that supplies may not be adequate as the heating season approaches.

Stockpiles of the power-plant fuel were 13 percent below the five-year average as of Sept. 19 and 11 percent lower than a year earlier, the Energy Information Administration said yesterday. Cold weather may blanket parts of the Midwest over the next eight to 14 days, a government forecast shows. The contract for October delivery expired today.

“We’ve kind of stopped falling,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “It’s holding its own. On Monday we’ll be trading the first winter month.”

Natural gas for October delivery rose 1.3 cents, or 0.3 percent, to settle at $3.984 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 12 percent below the 100-day average at 3:14 p.m. Gas gained 3.8 percent this week and is down 5.8 percent this year.

The combination of colder weather and below-average stockpiles may prompt prices for the fuel to increase, Saal said. “We’re going to be behind, it’s just by how much.”

Gas supply rose 97 billion cubic feet last week, surpassing the five-year average gain of 79 billion, the EIA said.

Shale Gas

Natural gas production from the Marcellus shale formation in Appalachia may climb 1 percent in October to 16 billion cubic feet a day from a month earlier, the EIA said Sept. 8 in its monthly Drilling Productivity Report. Total U.S. marketed output may gain 5.3 percent this year to 73.93 billion a day, the agency said Sept. 9 in its Short-Term Energy Outlook.

Drilling rigs targeting natural gas increased by nine to 338, led by gains in Texas, Baker Hughes Inc. said in a report today.

Power-plants account for 31 percent of gas demand, according to the EIA.

Below-normal temperatures will cover a portion of the central U.S., stretching from the northwest corner of Texas to North Dakota, Oct. 3 through Oct. 9, according to a forecast from the Climate Prediction Center in College Park, Maryland.

“We’ve seen a wash of buying,” said Aaron Calder, senior market analyst at Gelber & Associates Corp. in Houston. “Some of that is the perceived cold to start October.”

Calder said gas is “at a crossroads” and that whether gas will approach the $4.30 price levels or fall below $3.80 depends on whether the frigid weather materializes.

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