Nov. 15 (Bloomberg) -- Natural gas futures advanced to a three-week high in New York, capping the second straight weekly gain, as forecasts showed that moderate mid-November weather will give way to colder readings.
Gas rose 1.5 percent as Commodity Weather Group LLC said above-normal U.S. temperatures over the next five days will be followed by lower readings on the East Coast from Nov. 20 through Nov. 24. The futures, which gained in eight of the past nine days, rebounded yesterday from a 2.1 percent drop after a government report showed a below-forecast stockpile gain.
“It’s still chilly,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “The market is trying to digest the oscillation of the weather. There was a little bit of momentum yesterday as the number came out; that probably sustained itself today.”
Natural gas for December delivery rose 5.5 cents to $3.66 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Oct. 25. Trading volume was 26 percent below the 100-day average at 2:49 p.m. Prices climbed 2.8 percent this week and 9.2 percent this year.
The discount of December to January futures narrowed 0.2 cent to 4.8 cents. March gas traded 1.8 cents above the April contract versus 1.5 cents yesterday.
February $2.80 puts were the most active options in electronic trading. They were 0.1 cent lower at 0.6 cent per million Btu on volume of 1,518 at 4:12 p.m. February $5.15 calls also had volume of 1,518, gaining 1 cent to 0.6 cent. Puts accounted for 50 percent of trading volume.
The high temperature in New York City will go from 68 degrees Fahrenheit (20 Celsius), 15 above normal, on Nov. 18 to 44 degrees, 8 lower than average, two days later, according to AccuWeather Inc. in State College, Pennsylvania.
“There is going to be a lot more variability this winter” compared with previous winters, when there were longer periods of sustained cold or warmth, Anneliese Alexander, staff meteorologist for BNP Paribas SA, said in a conference call with clients and reporters today. “I expect big flips in the pattern going from a very warm pattern every couple of weeks to a very cold pattern every couple of weeks.”
This December will be colder compared with a year earlier, while January and February will be “toss ups,” depending on the timing of those cold fronts moving in and out of the U.S., she said.
About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.
U.S. inventories rose by 20 billion cubic feet in the week ended Nov. 8 to 3.834 trillion cubic feet, above the five-year average gain of 19 billion for the period, the EIA said yesterday. Analyst estimates compiled by Bloomberg showed an expected gain of 23 billion.
A supply surplus to the five-year average held steady for a second week at 1.5 percent, EIA data show. A deficit versus year-earlier levels narrowed to 2 percent from 2.9 percent the previous seven days.
BNP expects rising production during the winter to keep gas prices from breaching $4 per million Btu during the first half of 2014.
The number of rigs drilling for gas rose by five this week to 370, the most in three weeks, Baker Hughes Inc. data today showed. The gas rig count is down 14 percent this year.
The U.S. expects gas production to climb for the sixth straight year, driven by new wells coming online at the Marcellus shale in the Northeast, the EIA said in Short-Term Energy Outlook on Nov. 13. Marketed gas output will increase 1.6 percent to average a record 70.29 billion cubic feet a day from 2012, revised up from the previous month’s estimate of 70 billion.
Marcellus output may rise 3.3 percent in December to 12.9 billion cubic feet a day from an estimated 12.5 billion in November, the EIA said Nov. 12 in its monthly Drilling Productivity Report.
Technologies such as hydraulic fracturing, or fracking, have made it more economical to drill in shale rock to extract fuel. The U.S. produced 86 percent of its own energy in the first seven months of this year, on pace to be the highest annual rate since 1986, according to data from the EIA.
--Editors: Bill Banker, Richard Stubbe