Natural gas extends gains on cold weather outlook, inventories data

Natural gas rose for a sixth day in seven and is expected to continue advancing through next week on forecasts for cooler-than-average weather in the U.S., stoking demand for the power-station fuel.

On the New York Mercantile Exchange, natural gas for delivery in November rose by 1.10% to $3.764 per million British thermal units at 12:06 GMT. Prices held in range between days high of $3.781, near yesterdays 3-month high at $3.795, and days low of $3.727 per mBtu. The fuel rose by 1.3% on Thursday, a fifth daily gain in six, and extended its weekly advance to over 7.1%.

Gas continued rising on Friday as weather forecasting models pointed at colder-than-average weather in key U.S. consuming areas. MDA Weather Services in Gaithersburg, Maryland, said it expects below-average temperatures predicted in the central U.S. next week to sweep into the Northeast between October 20 and October 24. According to AccuWeather Inc., temperatures in Minneapolis may bottom at 33 degrees Fahrenheit on October 8, 6 below usual.

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 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 fuel also drew support from yesterdays natural gas storage report by the Energy Information Administration. The government agency said 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 weaks 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.

Natural gas is expected to continue rising through next week, according to a Bloomberg survey of analysts and traders. Seven participants wagered that the fuel will continue advancing, while two expected prices to fall and one remained neutral. The energy source shed almost 5% in the preceding two weeks.