Natural gas jumped to a five-month high in New York, capping its largest monthly gain since March, on forecasts for colder weather that would spur demand for heating homes and businesses.
Futures rose for a seventh day, the longest streak of gains since January 2011, as most of the U.S. will be blanketed with below-average temperatures from Dec. 6 through Dec. 12, according to the Climate Prediction Center in College Park, Maryland. About 49 percent of U.S. households use natural gas for heating, government data show.
“Natural gas in the wintertime is inversely related to where the thermometer reads,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “It’s pretty much that simple.”
Natural gas for January delivery advanced 5.9 cents, or 1.5 percent, to $3.954 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since June 19. Trading volume was 33 percent below the 100-day average. Prices jumped 10 percent this month and are up 18 percent this year.
The January contract was 0.3 cent below February futures, down 0.1 cent from Nov. 27. March gas traded 4.2 cents above April compared with 3.6 cents on Nov. 27.
February $2.80 puts were the most active options in electronic trading, dropping 0.1 cent to 0.2 cent on volume of 3,917 at 1:45 p.m. Puts accounted for 49 percent of volume.
Energy Transfer Partners LP said it extinguished a fire on the Panhandle Eastern Pipeline. The 30-inch gas line had a release overnight, according to an e-mailed statement from Vicki Granado, a spokeswoman for the company, the parent of Panhandle Eastern Pipeline Co. The company sees no impact to customer deliveries from the incident.
Natural gas inventories slid 13 billion cubic feet in the week ended Nov. 22 to 3.776 trillion cubic feet, the Energy Information Administration said in a Nov. 27 report.
A surplus to the five-year averaged widened to 0.5 percent from 0.4 percent the previous week. Supplies were 2.6 percent below year-earlier inventories.
“Even though we have a lot of gas in inventory, we have a lot of winter ahead of us,” Saal said. “It’s early in the season.”
The U.S. may have 3.4 percent more heating-degree days, a measure of weather-driven energy demand, from November to March compared with the same period last year, Commodity Weather Group said in a Nov. 25 seasonal outlook.
“Mid-December looks pretty cold,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “As long as Mother Nature cooperates, I think we can test $4.”
Prices may struggle to reach that level because of robust production rates, Shiyang Wang, an analyst at Barclays Plc in New York, said in a note to clients today.
“For the rest of the year, we believe that upside risks to natural gas prices remain capped, barring any significant production freeze-offs or extremely cold weather events,” Wang said.
The number of rigs drilling for gas in the U.S. declined by two to 367, Houston-based Baker Hughes Inc. said Nov. 27, down 13 percent from a year earlier.
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