BLBG: Natural Gas Poised for Biggest Weekly Gain Since May on Economy
By Reg Curren
Sept. 11 (Bloomberg) -- Natural gas futures in New York are poised for their biggest weekly gain since May on speculation a recovery in the U.S. economy is gaining momentum, spurring demand for industrial fuels.
Natural gas soared 15 percent yesterday, the biggest one- day gain in almost five years, sparked by Energy Department data that showed a smaller-than-forecast increase in U.S. stockpiles. Confidence among U.S. consumers probably increased in September for the first time in three months as the pace of job losses slowed and the economy showed signs of pulling out of the recession, according to survey of analysts by Bloomberg News.
“The biggest thing hanging over the head of gas was that the U.S. economy was sluggish and not recovering,” said Tom Orr, director of research at brokerage Weeden & Co. in Greenwich, Connecticut. “The sentiment has changed to a slightly improving posture.”
Natural gas for October delivery was trading at $3.234 per million British thermal units, down 2.2 cents, on the New York Mercantile Exchange at 12:50 p.m. in Singapore. Yesterday the contract jumped 42.7 cents, or 15 percent, to settle at $3.256, the largest one-day gain since Nov. 24, 2004. Futures are up 19 percent this week, heading for the biggest weekly gain since May 8. Gas has risen 35 percent since Sept. 4 and is down 42 percent so far this year.
Reports in recent days on U.S. manufacturing and unemployment have signaled the recession is easing, Orr said. The Reuters/University of Michigan preliminary index of consumer sentiment increased to 67.5 this month from 65.7 in August, according to the median estimate of 69 economists surveyed by Bloomberg News.
Gas Shares Advance
The Standard & Poor’s 500 index of oil and gas exploration and production companies followed futures higher. The index rose 3.3 percent to 424.17 yesterday, the highest level since Oct. 1, 2008. The S&P 500 Index rose 1 percent yesterday to 1,044.14, the fifth consecutive increase.
Chesapeake Energy Corp., the third-largest U.S. independent gas producer, rose 6.8 percent to $25.25 in composite trading on the New York Stock Exchange. The stock is up 56 percent this year. Anadarko Petroleum Corp., the largest independent producer, gained 2.6 percent to $57.83. XTO Energy Inc., the second- biggest independent producer, rose 3.9 percent to $40.89.
The United States Natural Gas Fund LP, the world’s largest exchange-traded gas fund, advanced $1.08, or 11 percent, to $11.18, down 52 percent this year. The fund owns futures and swaps and tries to track price changes in the fuel.
Supply Gain
Gas supplies advanced 69 billion cubic feet to 3.392 trillion cubic feet in the week ended Sept. 4, the Energy Department said in its weekly report. Analysts forecast an increase of 72 billion.
“The number was a bit of a surprise and I think people were worried about it coming in on the bearish side,” said Brad Florer, a trader at Kottke Associates Inc., a commodity futures broker in Louisville, Kentucky.
A U.S. stockpile surplus expanded after drilling surged in 2008 on higher prices and demand. The number of gas rigs working in the U.S. reached a peak of 1,606 a year ago and has since fallen 56 percent as prices tumbled 78 percent from a July 2008 high, Baker Hughes Inc. data show.
Producers may be scaling back output just as demand increases from power generators, as coal and nuclear power plants shut for maintenance, said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston.
‘Soft Curtailments’
“We may be seeing some soft curtailments,” she said. “We know they took their foot off the pedal, so we don’t see drilling activity” and they may be choking back wells.
Nuclear plants are running at 94 percent of capacity as five reactors are off line, according the U.S. Nuclear Regulatory Commission and Bloomberg data. Duke Energy Corp. and Entergy Corp. have shut plants for planned refueling.
Speculative short positions, or bets gas prices will fall, outnumbered long positions by 169,846 contracts in New York in the week ended Sept. 1, according to a report last week from the Washington-based Commodity Futures Trading Commission. The number of shorts declined 3.9 percent from a week earlier.
“With a market that is very short, you can see this craziness occur,” Viswanath said. “Going short this week has been tough.”
Price gains can force short sellers to close their positions by buying contracts to lock in gains or limit losses.
