Natural Gas Jumps to 10-Month High on Small Stockpile Gain

2011-6-3

Natural gas futures jumped to a 10- month high after a government report showed that U.S. stockpiles increased less than expected last week.

Gas futures rose 3.6 percent after the Energy Department reported inventories rose 83 billion cubic feet in the week ended May 27 to 2.107 trillion cubic feet. Analyst estimates compiled by Bloomberg showed an expected gain of 94 billion. Hotter-than-normal weather last week may have increased the use of gas to generate power for air conditioning.

“The number was low,” said Kyle Cooper, director of research at IAF Advisors in Houston. “We had some heat across the country last week, and the weather forecasts are still supportive.”

Natural gas for July delivery rose 16.5 cents to $4.794 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since July 30. Futures touched $4.859, the highest intraday price since Jan. 24.

The stockpile increase was smaller than the five-year average gain for the week of 99 billion cubic feet, department data show. A deficit to the five-year average widened to 2 percent from 1.3 percent the previous week.

“There was an explosion in the market this morning following a paltry 83-Bcf injection,” Pax Saunders, an analyst at Gelber & Associates in Houston, said in a note to clients. “Market watchers are asking, ‘where’s the gas?’”

Highs in Atlanta touched 92 degrees Fahrenheit (33 Celsius) on May 25, about 10 degrees higher than normal, according to AccuWeather Inc.

Texas Heat
Hotter-than-normal weather in the central, southern and eastern U.S. through June 16 may boost air conditioner use. Temperatures may be as much as 8 degrees above normal in the Great Lakes region next week, according to a note to clients today from Commodity Weather Group LLC in Bethesda, Maryland.

The high in Dallas on June 10 may be 98 degrees Fahrenheit (37 Celsius), 7 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Chicago may be 88, 8 degrees above normal.

Cooling demand in the U.S. may be 35 percent above normal from June 8 through June 12, David Salmon, a meteorologist at Weather Derivatives in Belton, Missouri, said in a note to clients today.

Power plants use about 30 percent of the nation’s gas supplies, according to the Energy Department.

Storm Season
A cluster of showers and thunderstorms in the west-central Caribbean Sea has a 20 percent chance of becoming a tropical cyclone, the National Hurricane Center said in a Tropical Weather outlook issued at 2 p.m. in Miami. An area of low pressure north of the Yucatan Peninsula has a 10 percent chance of development within the next 48 hours, the hurricane center said.

AccuWeather increased its 2011 forecast for the development of major hurricanes in the Atlantic Ocean yesterday, boosting its forecast for storms of Category 3 or higher to four from the three it predicted in March.

Gas futures volume in electronic trading on the Nymex was 454,491 as of 2:36 p.m., compared with the three-month average of 308,000. Volume was 270,411 yesterday. Open interest was 928,702 contracts. The three-month average open interest is 941,000.

The exchange has a one-business-day delay in reporting open interest and full volume data.

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