Natural gas extends gains on cold weather outlook

Natural gas rose on Tuesday and traded near Mondays 4-month high as weather forecasting models continued to show below-average temperatures in key U.S. consuming areas, boosting demand for the power-station fuel.

On the New York Mercantile Exchange, natural gas futures for November settlement rose for a fourth day and traded at $3.846 per million British thermal units at 9:15 GMT, up 0.67% on the day. Prices held in range between days high of $3.850, near yesterdays 4-month high of $3.854, and low at $3.816 per mBtu. The power-plant fuel rose on Monday and extended its weekly advance to 1.5% on Tuesday. Gas is up 15% this year.

The energy source extended gains on Tuesday amid forecasts for colder-than-usual weather in the U.S. According to Commodity Weather Group LLC in Bethesda, Maryland, temperatures in the central U.S. will fall below-normal between October 19 and October 28. AccuWeather Inc. said that temperatures in Milwaukee on October 26 may bottom at 29 degrees Fahrenheit, 11 below normal.

When cold weather is expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of the U.S. electricity generation. Consumption usually picks up from November through March. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand and 50% of U.S. households use gas for heating.

The Energy Information Administration said last Thursday that U.S. natural gas inventories rose by 90 billion cubic feet in the week ended October 4, compared to the five-year average build of 84 billion and last weak’s increase of 73 billion cubic feet during the comparable week. The reading however outperformed analysts’ expectations for a 94 billion cubic feet gain, allowing the energy source to extend positions.

U.S. natural gas stockpiles now totaled 3.577 trillion cubic feet and were 3.7% below the amount of gas held in underground storage hubs during the same period last year. The surplus over the five-year average reserves widened by 0.2% to 1.6%. Stocks in the East Region received net injections of 51 billion cubic feet and were 101 billion below the five-year average. Inventories in the Producing Region rose by 30 billion cubic feet and were 102 billion above the five-year average.

The Energy Information Administration said last week it will cease further operations and will not release its weekly U.S. natural gas and crude oil inventories reports until government funding is resumed.