Natural Gas Climbs for Second Day

On May 20, 2013, in natural gas futures news, by Infinity Trading
natural gas options

natural gas futures climb

May 20th, 2013

Natural gas futures advanced for a second day in New York on forecasts for above-normal temperatures that would boost demand for the power-plant fuel.

Gas gained as much as 2.6 percent after Commodity Weather Group LLC in Bethesda, Maryland, predicted warmer-than-average weather in the Northeast and Great Lakes region through May 24. The high in New York on May 22 may be 82 degrees Fahrenheit (28 Celsius), 10 more than usual, according to AccuWeather Inc. in State College, Pennsylvania.

“The weather continues to confound the bears,” said Phil Flynn, a senior market analyst for Price Futures Group in Chicago. “Temperatures have gone from colder than normal to warmer than normal. There’s been an incredible amount of volatility with the weather situation.”

Natural gas for June delivery rose 7.4 cents, or 1.8 percent, to $4.129 per million British thermal units at 9:45 a.m. on the New York Mercantile Exchange. Trading volume was 7.4 percent below the 100-day average for the time of day. Prices have climbed 23 percent this year.

The discount of June to October futures, a measure of supply expectations for the summer, narrowed 0.4 cent to 7.8 cents.

June $4 puts were the most active options in electronic trading, dropping 2.7 cents to 3.2 cents per million Btu on volume of 190 at 1:15 a.m. Puts accounted for 59 percent of trading volume.

The futures jumped the most in three weeks on May 17 after the U.S. conditionally approved the Freeport LNG liquefied natural gas export project in Texas.

Natural Gas Futures: Hedge Funds

Hedge funds reduced bullish natural gas bets by the most in three months last week. Money managers cut net-long positions, or wagers on higher prices, by 3.7 percent in the seven days ended May 14, the biggest drop since Feb. 12, according to the Commodity Futures Trading Commission’s May 17 Commitments of Traders report.

The measure climbed last month to the highest level in records dating back to January 2010.

The high in Cleveland on May 22 may be 80 degrees Fahrenheit, 10 more than average, according to AccuWeather. Power generation accounts for 33 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.

The Freeport project was the second to receive approval from the Energy Department to send gas to countries that don’t have free-trade agreements with the U.S. The terminal would be able to export 1.4 billion cubic feet a day. The Freeport development, partly owned by ConocoPhillips (COP), Dow Chemical Co. (DOW) and Osaka Gas Co. (9532), must still win approval from the Federal Energy Regulatory Commission.

Natural Gas Futures: LNG Exports

In May 2011, the department conditionally approved Cheniere Energy Inc.’s Sabine Pass LNG Terminal in Louisiana for a rate of as much as 2.2 billion cubic feet a day. The government has weighed 20 applications for export terminals in recent months, which could ship the equivalent of 41 percent of U.S. total production this year, Energy Department data show.

The U.S. may export 6.5 billion cubic feet a day of natural gas from seven projects by mid-2016, Morgan Stanley said in an e-mailed report today.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.80 per million British thermal units this year, higher than the previous estimate of $3.52, the EIA said May 7 in its monthly Short-Term Energy Outlook. The average may slump to $3.77 in the third quarter before climbing to $3.92 during the final three months of the year.

Gas inventories totaled 1.964 trillion cubic feet in the week ended May 10, 4.1 percent below the five-year average and 26 percent less than last year’s level, the EIA’s weekly storage report showed on May 16.

- Christine Buurma in New York at Bloomberg.