Natural Gas Futures Gain as Lower Temperatures May Lift Demand

By Reg Curren

Oct. 20 (Bloomberg) -- Natural gas futures in New York advanced for the fifth time in six days as colder weather forecast for the U.S. Midwest and Northeast may lift demand for the furnace fuel.

Gas consumption peaks during the cold-weather months, when demand outstrips production. Below-normal temperatures are expected in the eastern half of the country starting Oct. 22 and may last for the next week, according to MDA Federal Inc.'s EarthSat Energy Weather.

``We've got colder-than-normal temperatures coming in and last week's storage was a little disappointing,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``We may have hit a little bit of a seasonal bottom.''

Natural gas for November delivery rose 27.9 cents, or 4.1 percent, to $7.065 per million British thermal units at 10:04 a.m. on the New York Mercantile Exchange. Gas advanced 3.8 percent last week, the biggest gain since the week ended June 6.

``We had been blessed with very nice weather and now we have some cold weather outside the doorstep,'' said Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida.

In the U.S., about 52 percent of all households use natural gas as their main heating fuel, according to the Energy Department.

Lower Prices

Commodities, including natural gas, have also been beaten down to prices that now make them attractive to buy, Rose said. Gas has declined 48 percent from a 30-month closing high of $13.577 per million Btu on July 3.

``A lot of people looked at natural gas around $6.50 and viewed that as very cheap for winter time and have been buying it,'' Rose said.

Gas dipped to $6.436 per million Btu on Oct. 16, its lowest price in more than a year.

Inventories of gas rose 79 billion cubic feet in the week ended Oct. 10, below analyst expectations, to 3.277 trillion cubic feet, a department report showed Oct. 16. Stockpiles were 87 billion cubic feet, or 2.6 percent, below inventories for the same period a year earlier.

Supplies last November reached a record 3.545 trillion cubic feet to start the heating season.

Utilities and large industrial users rebuild gas stockpiles in the spring and summer to have enough on hand when the heating season starts.

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