Natural Gas Futures Advance on Speculation of Colder Weather

By Reg Curren

Oct. 17 (Bloomberg) -- Natural gas futures in New York gained for the fourth day this week as U.S. commercial consumers sought supplies before demand picks up with colder weather.

Below-normal temperatures are forecast from Texas to Massachusetts late next week, according to a 14-day outlook from the Climate Prediction Center in Camp Springs, Maryland. Demand for the heating and industrial fuel peaks during the cold weather months in the Northern Hemisphere.

``Utilities and electricity generators are locking in their prices because these are realistic prices for them,'' said Ed Kennedy, a trader with Commercial Brokerage Corp. in Miami. ``You're not going to get fired for buying $6 gas.''

Natural gas for November delivery rose 16.3 cents, or 2.4 percent, to $6.866 per million British thermal units at 11:28 a.m. on the New York Mercantile Exchange. Gas has advanced 5.1 percent this week.

Prices are likely to continue trading in a narrow range until the arrival of the first significant blast of cold weather, Kennedy said.

``It has been chamber-of-commerce weather and we're getting to the end of that in the near term,'' he said. ``Forecasters are saying below-normal temperatures for November.''


Inventories of gas rose 79 billion cubic feet in the week ended Oct. 10, below analyst expectations, to 3.277 trillion cubic feet, a U.S. Energy Department report yesterday showed. Thirteen of 17 analysts in a Bloomberg survey expected an increase of at least 80 billion cubic feet.

``There's a lot of buying support under the $7 level and the possibility of marginal production possibly going down,'' said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. ``It's come down so far it makes it more attractive from an end- user's perspective to be buying.''

Cold-Weather Demand

Gas has declined 49 percent from a 30-month closing high of $13.577 per million Btu on July 3.

Utilities and large industrial users have been boosting stockpiles of gas since the end of last winter to have enough for this cold-weather season, when demand exceeds production. The rebuilding period typically ends in early November.

``It's starting to get to the time of year for the seasonal low price and we're starting to prepare for winter,'' said Neill. ``At some point, this market is going to turn back up and I kind of think we're there.''

Prices in the 2007-2008 season from Nov. 1 to March 31 advanced 21 percent and averaged $8.327 per million Btu, according to data compiled by Bloomberg. Prices a year earlier averaged $7.346 per million Btu.

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