Natural Gas Advances Second Day as Winter Heating Season Nears

By Mario Parker

Oct. 22 (Bloomberg) -- Natural gas futures in New York rose for a second day as the approach of cold weather in the U.S. spurred demand for the heating fuel.

This winter may be the coldest in five years, especially in the eastern half of the country, according to AccuWeather.com. Demand exceeds production during the winter in the U.S. where more than half of all homes rely on the fuel for heating. A rising dollar sent crude and heating oil prices lower.

``The strength in the dollar is really putting the hammer down on commodities, but natural gas is showing that it's more of a domestic product,'' said Tom Orr, research director at Weeden & Co. in Greenwich, Connecticut.

Natural gas for November delivery rose 7.6 cents, or 1.1 percent, to $6.92 per million British thermal units at 9:16 a.m. on the New York Mercantile Exchange. Gas futures have dropped 7.5 percent this year.

``It's gotten quite cooler out here in the Northeast,'' Orr said. ``We're getting into the winter heating season.''

U.S. gas inventories are 85 billion cubic feet, or 2.7 percent, above the five-year average for this time of year, according to the Energy Department. Supplies lag behind year- earlier levels by 87 billion cubic feet. Stockpiles reached a record 3.545 trillion in November 2007 to start the most recent cold-weather season.

Supplies may have gained 75 billion cubic feet last week, according to the median of eight estimates by analysts surveyed by Bloomberg. The average change over the past five years is an increase of 62 billion cubic feet, according to government data. The Energy Department is scheduled to release its supply report covering the week ended Oct. 17 tomorrow.

Lower prices for natural gas may also prompt producers to cut output, Orr said.

``They could put more rigs down and that's going to place a floor on gas,'' he said.

To contact the reporters on this story: Mario Parker in Chicago at mparker22@bloomberg.net;