NEW YORK (MarketWatch) - Natural gas futures surged more than 8% Thursday to their highest level in 11 months after government data showed U.S. inventories fell more than expected, signaling a recovery in demand as cold weather hit major gas-consuming regions.
Crude-oil futures briefly fell below $70 a barrel for the first time in two months.
After nearly nine months of build-ups, natural gas stockpiles declined from their record highs, down 64 billion cubic feet in the week ended Dec. 4, the Energy Information Administration reported. Analysts surveyed by Platts had expected a withdrawal of 44 billion to 48 billion cubic feet.
Natural gas for January delivery rose 40 cents, or 8.2%, to $5.298 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since mid January, according to trading data collected by FactSet. The United States Natural Gas Fund /quotes/comstock/13*!ung/quotes/nls/ung (UNG 9.57, -0.18, -1.85%) gained 7%. Natural gas futures have gained about 9% this month, although they are still down 6% this year.
"It's the first draw on natural gas inventories of the heating season, and with the current cold weather and more expected, we are getting some overreaction to the numbers," said James Williams, an economist at energy research firm WTRG Economics. "Inventories should continue their decline from now on since we are already in the winter."
Despite the decline, natural gas stocks, at 3,773 billion cubic feet, were still 472 billion cubic feet higher than last year at this time and 513 billion cubic feet above the five-year average, the EIA data showed.
"Inventories normally start falling sometime in November, so this was a little late for the first draw of the heating season," said Williams.
Forecasts are predicting colder weather in the Northeast and Midwest, two major gas consumer regions in the U.S.
Crude falls below $70
In other energy trading Thursday, crude fell for a seventh straight session, briefly moving below $70 a barrel for the first time since Oct. 7, before reducing losses and ending slightly lower.
Crude for January delivery fell 13 cents, or 0.2%, at $70.54 a barrel on the Nymex. It fell as low as $69.73 earlier in the session. The United States Oil Fund /quotes/comstock/13*!uso/quotes/nls/uso (USO 35.43, -0.05, -0.14%) was last down 0.5%.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY 76.57, +0.53, +0.69%) was almost flat at 76.041. The dollar and commodities prices have had a strong inverse relation in recent trading, with a stronger dollar pushing down gold and oil prices in the past few days. Read more on currencies.
In economic news, first-time jobless claims rose by 17,000 to a seasonally adjusted 474,000 in the week ending Dec. 5, the Labor Department said. Economists surveyed by MarketWatch had expected initial claims to fall to about 450,000. Read more on jobless claims. Meanwhile, the total number of people claiming benefits of any kind topped 10 million, a sign of very sluggish hiring.
Also in economic news, the U.S. trade deficit unexpectedly narrowed by 7.6% in October to $32.9 billion, the Commerce Department.
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