Natural gas gains as storm Karen strengthens

Natural gas rose for the first time in three days on Friday as tropical storm Karen continued to move north-northwestward and is poised to reach hurricane strength by the end of the day, forcing companies to evacuate personnel from platforms. A bearish report by the EIA on Thursday limited gains.

On the New York Mercantile Exchange, natural gas for delivery in November rose by 0.27% to $3.509 per million British thermal units at 8:59 GMT. Prices held in range between days high and low of $3.516 and $3.494 per mBtu. The fuel fell by 2.5% in the past two days but trimmed its weekly decline to 2.3% after rising on Friday.

Natural gas pared weekly losses as the National Hurricane Center reported on Thursday that a low-pressure area over the northeastern tip of the Yucatan Peninsula of Mexico had strengthened to a tropical storm named Karen and was moving north-northwestward. The agency reported on Friday that Karen is 515 kilometers south of the mouth of the Mississippi River and is moving with 17 kmh. Maximum sustained winds reach up to 100 kmh. Karen is expected to be at hurricane strength later today and early Saturday.

According to the Energy Information Administration, the Gulf accounts for 23% of U.S. crude production, 45% of petroleum refining capacity and 5.6% of domestic natural gas output. Some oil producers already began evacuating non-essential personnel from their platforms. Anadarko Petroleum Corp. shut and evacuated three platforms and a hub in the central and eastern parts of the Gulf. Others have also begun to move personnel out of Karen’s path yesterday.

Gas was also supported as weather forecasts predicted colder weather and snow over the central parts of the U.S., boosting demand for the power-station fuel. 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 declines in autumn before picking 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.

Gains however remained limited after the Energy Information Administration reported yesterday that U.S. natural gas inventories rose more than expected last week, signalling lingering demand. The agency said gas stockpiles rose by 101 billion cubic feet in the week ended September 27, underperforming analysts’ projections for a surge in the range between 82 and 100 billion cubic feet. Last week’s build was also well above last year’s 77 billion gain during the comparable week and the five-year average increase of 82 billion cubic feet.

Total gas held in underground U.S. storage hubs equaled 3.487 trillion cubic feet, which was 4.3% below last year’s inventories at 3.642 trillion. The surplus over the five-year average stocks of 3.438 trillion cubic feet widened to 1.4% after rising to 0.9% in the preceding week.