Natural Gas Jumps on Speculation of Below-Average Storage Gain
Nov. 17 (Bloomberg) -- T. Boone Pickens, the billionaire chairman of BP Capital LLC, talks about the outlook for crude oil prices. Pickens also discusses U.S. dependence on overseas oil, and prospects for natural-gas powered vehicles and a U.S. energy bill. He talks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Natural gas rose the most in four months on speculation that an Energy Department report tomorrow will show that stockpiles gained less than the five-year average, eroding an inventory surplus.
The Energy Department may say that supplies increased 8 billion cubic feet last week, according to the median of 22 analyst estimates compiled by Bloomberg. The five-year average gain for the week is 18 billion.
“There’s cold temperatures on the rise, and there’s the possibility that they may report a net storage withdrawal tomorrow,” said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston, who estimated that inventories dropped by 5 billion cubic feet.
Natural gas for December delivery jumped 21.2 cents, or 5.6 percent, to settle at $4.03 per million British thermal units on the New York Mercantile Exchange, the largest one-day increase since July 15, when futures for near-month delivery surged 6.5 percent to $4.586.
Gas has declined 28 percent this year as inventories reached record highs. Stockpiles increased 19 billion cubic feet in the week ended Nov. 5 to 3.84 trillion cubic feet, the Energy Department said last week.
The U.S. is nearing the end of the shoulder before heating demand picks up as temperatures fall. About 52 percent of U.S. households use natural gas for heat.
More Cold in Forecast
Forecasters are calling for below-normal temperatures in the 11- to 15-day outlooks, bolstering demand for the fuel. Below-normal temperatures will span the East Coast from Florida to Maine, Commodity Weather Group forecasters led by Matt Rogers said in a report today.
“If anything, today’s forecast is looking colder over the eastern half of the country than it was yesterday” for Nov. 28 through Dec. 2, the Weather Channel’s WSI Corp. said in a forecast today.
“What you’ve got is a few different things pushing up that price,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “It’s weather and this week’s inventory number.”
Cumulative heating degree days increased by seven last week, while injections into storage dropped 22 percent, indicating that storage may have already begun its seasonal period of withdrawals, Viswanath said in a note to clients.
Energy Demand
The heating-degree days value, calculated by subtracting the average daily temperature from a base of 65 degrees, is designed to show energy demand, according to the National Weather Service. The higher the value, the colder the weather, indicating more energy is probably consumed to heat homes and businesses.
Natural gas has closed near or above the 50-day moving average of $3.80 for the past three days, indicating support at that level and attracting traders who are looking for a bargain- price investment, said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida.
“Natural gas is the only one that did not follow all the rest in the huge bull run in commodities, and people are reaching out and buying stuff they deem is cheap,” Rose said.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, gained 11.37 cents, or 3.1 percent, to $3.7733 per million Btu on the Intercontinental Exchange.
Gas futures volume in electronic trading on the Nymex was 270,892 as of 2:38 p.m., compared with a three-month average of 266,000. Volume was 227,575 yesterday. Open interest was 781,273 contracts, compared with the three-month average of 809,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
