Aug. 12 (Bloomberg) -- Natural gas futures rose the most in more than three weeks in New York on forecasts for hotter-than- normal weather that would spur fuel demand from power plants.
Gas climbed 2.5 percent, the biggest daily gain since July 18, as MDA Weather Services in Gaithersburg, Maryland, said temperatures may be higher than usual in the northern tier of the U.S. from Aug. 17 through Aug. 26. The futures dropped 3.5 percent last week to a five-month low amid forecasts that showed normal or cooler-than-average weather in the region.
“We have more warmth coming into the equation and that’s supporting prices,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “We were getting ahead of ourselves on the downside.”
Natural gas for September delivery rose 8 cents to settle at $3.31 per million British thermal units on the New York Mercantile Exchange. Trading volume was 42 percent above the 100-day average at 2:44 p.m. Prices are up 19 percent from a year ago.
The discount of September to October futures narrowed 0.2 cent to 2.5 cents. October gas traded 40.1 cents below the January contract, compared with 40.7 cents on Aug. 9.
September $3 puts were the most active options in electronic trading. They were 1 cent lower at 0.8 cent per million Btu on volume of 482 at 2:44 p.m. Puts accounted for 52 percent of trading volume. Implied volatility for at-the-money options expiring in September was 32.95 percent at 2:45 p.m., compared with 32 percent on Aug. 9.
Net-long wagers on four U.S. natural gas contracts declined 9.2 percent, dropping 24,693 futures equivalents to 244,135 in the week ended Aug. 6, according to Commodity Futures Trading Commission data released Aug. 9. It was the lowest level since the week ended March 5.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
The high in New York on Aug. 22 may be 92 degrees Fahrenheit (33 Celsius), 10 more than usual, according to AccuWeather Inc. in State College, Pennsylvania. Temperatures in Boston may reach 89 degrees, also 10 higher than average.
Power generation accounts for 32 percent of U.S. gas demand, according to the EIA the Energy Department’s statistical arm.
Gas stockpiles totaled 2.941 trillion cubic feet in the week ended Aug. 2, 0.7 percent above the five-year average, rising to a surplus for the first time since March. Inventories were 9.2 percent below year-earlier supplies.
The U.S. gas market is the most oversupplied since 2011, Soozhana Choi, an analyst at Deutsche Bank AG in Washington, said in a note to clients today.
“We see a low likelihood for improvement in the next two weeks,” Choi said.
The expanding supply surplus is bearish for gas prices, Adam Longson, an analyst at Morgan Stanley in New York, said in an e-mailed report to clients today.
Prices will remain “under pressure” in August and September amid waning cooling demand and robust production, Longson said.
The U.S. said in an Aug. 6 report that 2013 marketed gas production would average 69.89 billion cubic feet a day, down from last month’s forecast of 69.96 billion. Output would be up 1 percent from a year ago at a record as onshore supplies climb.
Stockpiles may total 3.8 trillion cubic feet at the end of October, about 130 billion below last year’s peak, the EIA said.
The U.S. met 87 percent of its own energy needs in the first four months of 2013, on pace to be the highest annual rate since 1985, according to EIA data.
--Editors: Bill Banker, Charlotte Porter