Natural gas futures extend gains on cold weather forecasts

Natural gas futures rose to the highest in more than a week as weather forecasting models predicted below-normal temperatures in key U.S. consuming areas through the middle of November, limiting demand prospects prior to the peak winter consuming season.

On the New York Mercantile Exchange, natural gas futures for settlement in December traded at $3.581 per million British thermal units at 14:53 GMT, up 2.44% on the day. Prices surged to a session high of $3.619 per mBtu, the strongest level since October 31, while days low was touched at $3.484. The power-station fuel added 0.5% on Wednesday and rose back to positive weekly territory following Thursdays advance, up 1.7%.

The energy source extended gains as weather forecasts continued to call for lower-than-average temperatures in key U.S. consuming areas. According to MDA Weather Services in Gaithersburg, Maryland, readings in the eastern half of the U.S. may be below normal through November 16, confounding previous projections for milder conditions. According to AccuWeather Inc., temperatures in New York on November 14 may bottom at 32 degrees Fahrenheit, 10 below average.

Victor Zevallos, an energy trader at FCStone Latin America LLC, commented for Bloomberg: “It seems like there’s going to be more heating demand coming down the line. The forecasts are looking pretty cold for the next couple of weeks.”

When cool 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 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 49% of U.S. households use the energy source for heating.

Market players also awaited the release of EIAs weekly U.S. natural gas storage report. According to analysts projections, U.S. inventories probably rose by 35 billion cubic feet in the week ended November 1, below the five-year average gain of 36 billion but above last year’s 27 billion cubic feet increase during the comparable week.

The Energy Information Administration said last Thursday that U.S. natural gas stockpiles added 38 billion cubic feet in the week ended October 25, well below the five-year average gain of 57 billion cubic feet and last year’s 66 billion increase during the comparable period. Total gas held in underground U.S. storage hubs now equaled 3.779 trillion cubic feet, 3.1% below last year’s 3.899 trillion. The surplus over the five-year average level of supplies narrowed by 0.5% to 1.6%.