Natural gas futures rose in
New York to the highest price in almost five months as a blast of arctic air spurred heating-fuel demand.
Prices
alternated between gains and losses before ending the session up 2.7
percent. The government’s Global Forecast System midday update showed
that temperatures will be below normal in the eastern U.S. next week
before moving closer to seasonal norms Nov. 30 through Dec. 4, according
to Frontier Weather Inc. Gas demand this week jumped to an eight-month
high as temperatures tumbled, according to LCI Energy Insight data.
“A very cold start to the winter has resurfaced repressed market memories of last winter, with fickle short-term
weather forecasts
supporting the ongoing tug-of-war in natural gas prices,” said Teri
Viswanath, director of commodities strategy at BNP Paribas SA in New
York. “While the midday model runs showed a slightly warmer version of
the 11- to 15-day forecast period, there appears sufficient cold weather
to entice buyers.”
Natural gas for December delivery rose 11.8 cents to settle at $4.489 per million British thermal units on the
New York Mercantile Exchange,
the highest close since June 25. Prices rose to $4.503 and dropped to
$4.25 during the session. Volume for all futures traded was more than
double the 100-day average at 3:48 p.m. Prices are up 22 percent from a
year ago.
Price Retreat
Gas retreated during the session
as futures faced resistance in the $4.50 range, said Ellen Stamm, global
natural gas analyst at
Schneider Electric in Louisville,
Kentucky. It will take colder weather to break through that level, she said.
December
$4.75 calls were the most active options in electronic trading, falling
0.6 cent to 2.3 cents on volume of 2,341 as of 3:48 p.m.
The
weather model for the 11- to 15-day period “averages a couple degrees
warmer than normal for just about everywhere east of the Rockies except
for the Northeast, which averages nearer to normal,” said Jim Southard,
meteorologist with Frontier in Tulsa,
Oklahoma.
The expected temperature range in
St. Louis on Dec. 2 is now 43 degrees Fahrenheit (6 Celsius) to 51, up from the previously forecast range of 34 to 41, he said.
The noon model showed no significant changes in the forecast for the next week, Southard said. A surge of polar air from
Canada
will push from the Great Plains to Florida Nov. 25 through Nov. 29,
with the Midwest seeing the strongest intensity of the cold, according
to MDA Weather Services in Gaithersburg,
Maryland. About 49 percent of U.S. households use gas for heating.
Inventory Report
“This
is an earlier cold snap and when they have to eat into storage earlier
than they expected, that can make the market a little bit nervous,”
Chris Ellsworth, fuel branch chief with the
Federal Energy Regulatory Commission’s office of enforcement.
Gas
stockpiles fell 17 billion cubic feet in the week ended Nov. 14 to
3.594 trillion, topping the five-year average decline of 10 billion for
the period, the U.S. Energy Information Administration report showed.
Analyst estimates showed an expected drop of 11 billion, as did a survey
of Bloomberg users.
A deficit to weekly five-year average
inventory levels widened to 6.4 percent from 6.2 percent the previous
week, expanding for the first time since March.
Supplies were 5.3 percent below year-earlier inventories, compared with 5.7 percent in last week’s report.
Bigger Decline
Early
data indicates that the stockpile decline in next week’s report will
jump to 150 billion cubic feet, given the blast of arctic air sweeping
most of the lower 48 states, according to Viswanath and Stamm. The
five-year average drop for the seven days ending Nov. 21 is 6 billion.
Spectra
Corp.’s Algonquin gas pipeline in the Northeast curtailed 50 percent of
secondary nominations on the system at the end of last week and that
rose to about 80 percent as it got colder this week, said Valeria
Annibali, energy industry analyst at FERC’s enforcement office. That
signals less gas was available for power generators as more pipeline
capacity was used to serve firm contract holders, such as distribution
companies for households, she said.
Pipeline data this week also showed a notable shift in gas flows, with the Marcellus shale in
Pennsylvania
and West Virginia meeting a bigger share of Northeast demand while
Louisiana and Gulf flows stopped in the mid-Atlantic region, she said.
Gas demand jumped to 111.3 billion cubic feet on Nov. 18, the most for any day since Feb. 11, data show from LCI Energy in El Paso,
Texas. Gas deliveries for the next day jumped to a seven-month high of $10.78 per million Btu on the day-ahead market on the
Intercontinental Exchange. Algonquin prices today closed at $5.87.
“You expect prices like that in the depths of winter,” Ellsworth said.
Source : Bloomberg
