Oct. 7 (Bloomberg) -- Natural gas futures capped the biggest daily gain in more than 11 weeks on forecasts for warmer weather that would stoke power demand, and as some Gulf of Mexico production remained shut after Tropical Storm Karen.
Gas climbed 3.5 percent, the most since July 18. MDA Weather Services in Gaithersburg, Maryland, predicted above- normal temperatures in the central and eastern U.S. through Oct. 21. About 37 percent, or 1.4 billion cubic feet a day, of Gulf gas output was still offline, the U.S. Bureau of Safety and Environmental Enforcement said today.
“Temperatures have been above normal, which is supportive for gas demand,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “Traders are still pricing in some of the production lost because of the storm.”
Natural gas for November delivery rose 12.3 cents to $3.629 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Sept. 20. Trading volume was 53 percent above the average at 2:39 p.m. Prices have advanced 8.3 percent this year.
The discount of November to December futures narrowed 0.9 cent to 15.9 cents. November gas traded 26.9 cents below the January contract, compared with 27.9 cents on Oct. 4.
November $2.95 puts were the most active options in electronic trading. They were 0.1 cent lower at 0.1 cent per million Btu on volume of 3,178 at 2:59 p.m. Puts accounted for 57 percent of trading volume. Implied volatility for November at-the-money options was 29.22 percent at 2:45 p.m., compared with 28.26 percent on Oct. 4.
Karen dissipated as it moved over southeastern Alabama, the National Hurricane Center said yesterday. As much as 48 percent of gas output was shut during the storm, BSEE data show.
Enbridge Inc.’s Manta Ray, Mississippi Canyon, Garden Banks and Nautilus offshore gas lines had returned to service or were preparing to resume operations, the company said yesterday.
BP Plc’s Destin Pipeline terminated a force majeure, according to a company notice today. The Gulf will account for 5.6 percent of U.S. gas production this year, data from the Energy Department’s Energy Information Administration show.
“Production losses related to Tropical Storm Karen look somewhat higher than anticipated,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, wrote in a note to clients today.
The high in Memphis, Tennessee, on Oct. 13 may be 85 degrees Fahrenheit (29 Celsius), 10 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Philadelphia may be 72 degrees, 4 more than usual.
Power generation accounts for 32 percent of U.S. gas demand, according to the EIA.
Gas inventories totaled 3.487 trillion cubic feet in the week ended Sept. 27, 1.4 percent above the five-year average and 4.3 percent below last year’s supplies for the period, EIA data show.
The U.S. met 87 percent of its own energy needs in the first six months of 2013, on pace to be the highest annual rate since 1986, EIA data show.
--With assistance from Eliot Caroom in New York. Editors: Bill Banker, Richard Stubbe