Natural Gas Futures Gain Most in Three Weeks on Second Weekly Rig Decline

Natural gas futures advanced the most in three weeks as data showed the number of U.S. gas drilling rigs fell for a second consecutive week.

Gas gained 3.3 percent after Houston-based Baker Hughes Inc. said the rig total declined 8 to 866 this week, the lowest level since the week ended Jan. 29, 2010. Prices also rose after gas settled near a six-week low yesterday, spurring buying from traders betting that the market had hit a bottom for now.

“It’s the second drop in a row and it is what the bulls are looking for,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “It seems prices are at the bottom of the range.”

Natural gas for June delivery rose 13.6 cents to settle at $4.23 per million British thermal units on the New York Mercantile Exchange, the biggest percentage gain since April 28. The futures fell 0.4 percent this week.

“The market seems to be thinking that we might have done enough this week with selling off,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We’re kind of getting a dead cat bounce.”

Gas stockpiles gained 92 billion cubic feet in the week ended May 13 to 1.919 trillion cubic feet, the Energy Department said yesterday. The five-year average change for the week is an increase of 91 billion cubic feet, department data show. Inventories rose 78 billion cubic feet a year earlier.

Storage levels were down 11 percent from a year earlier, narrowing from 12 percent in the previous week, department data showed. Stockpiles were 1.8 percent below the five-year average last week compared with 2 percent the previous week.

Temperatures may be normal or above-normal across most of the continental U.S. from May 25 through May 29, according to WSI Corp. in Andover, Massachusetts. Warmer-than-normal weather is likely along the Eastern Seaboard.

Texas Weather

The high in Dallas on May 28 may be 92 degrees Fahrenheit (28 Celsius), 5 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Chicago may be 64, 12 below normal.

Cooling demand in the south-central U.S. may be 12 percent below normal from May 26 through May 30, David Salmon, a meteorologist with 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.

Pipeline Shipments

Natural gas shipments to U.S. power plants were set to increase for a fifth day as hotter-than-normal weather in the South boosts demand for gas-fired electricity.

A sample of scheduled gas shipments for U.S. electricity generation gained 3.6 percent to 13.5 million dekatherms (13.1 billion cubic feet) from yesterday’s 13 million, according to data compiled by Bloomberg as of 3:46 p.m. in New York.

Gas deliveries to Florida power plants advanced 6.1 percent to 2.72 million dekatherms.

Gas futures volume in electronic trading on the Nymex was 235,934 as of 2:44 p.m., compared with the three-month average of 306,000. Volume was 315,365 yesterday. Open interest was 947,797 contracts. The three-month average open interest is 945,000.

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

Source: http://www.bloomberg.com/news/2011-05-20/natural-gas-futures-advance-in-new-york-after-five-week-low-spurs-buying.html