Natural Gas Rises as Crude Gains, Lower Price Attracts Buyers

By Reg Curren

Aug. 7 (Bloomberg) -- Natural gas in New York advanced as crude oil climbed and as speculators who had sold contracts on a bet that prices would fall bought the positions back to protect gains or limit losses.

Oil gained for the first time in four days after a pipeline explosion halted shipments from Azerbaijan to the Mediterranean. Gas tumbled 34 percent since June 30 amid increasing supply and lower crude prices.

``Natural gas has been taking its cue from crude and oil is up pretty good,'' said Lannie Cohen, president of Capitol Commodity Services Inc., a brokerage in Indianapolis. ``The higher crude goes the more talk you hear about using natural gas as a replacement.''

Natural gas for September delivery rose 6.6 cents, or 0.8 percent, to $8.839 per million British thermal unit at 9:28 a.m. on the New York Mercantile Exchange. Gas is below its 200-day moving average of $9.568 per million Btu. The fuel is 42 percent higher in the past year and on this day in 2007 closed at $6.201 per million Btu. Gas rose to $13.577 on July 3, the highest since December 2005.

Crude oil for September delivery jumped $2.02, or 1.7 percent, to $120.60 a barrel in New York. Oil yesterday fell as low as $117.11 a barrel amid signs of a global economic slowdown likely to curtail already weakening demand. Futures touched a record $147.27 in New York on July 11.

Gas slipped to a ``seasonal low and now we'll be up for the next month through the hurricane season,'' said Cohen.

Storm Season

The most active portion of the Atlantic storm season runs from mid August to late September, according to the National Hurricane Center in Miami. Storms can spur prices by threatening energy-producing areas of the Gulf of Mexico and disrupting oil and gas output.

Gas also rose before a government report today that may show inventories expanded last week more than average for this time of year. Supplies gained 62 billion cubic feet in the week ended Aug. 1, according to the median of 18 analyst estimates compiled by Bloomberg News. The average change for this time of year over the past five is an increase of 50 billion.

Inventories may end the summer around 3.4 trillion cubic feet, adequate for heating needs next winter, analysts have said.

Supplies are 2.461 trillion cubic feet, or 0.5 percent, below the five-year average of 2.473 trillion for this time of year, the Energy Department said July 31.

The department is scheduled to release its weekly natural gas inventory report at 10:35 a.m. in Washington.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.