By Reg Curren
April 14 (Bloomberg) -- Natural gas gained for a second day in New York on speculation that an improving U.S. economy will lift demand for the industrial and power-plant fuel.
Gas rose as a Commerce Department report showed retail sales increased more than expected in March, and the head of CSX Corp., the country’s third-largest railroad, said the economy is showing strength as the company’s first-quarter profit topped analyst forecasts. Industrial users account for about 29 percent of gas consumption.
“Retail sales were pretty strong and there were some strong earnings releases this morning,” said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston. “The evidence is pointing to economic conditions now likely improving. Recent data is pointing to a real rebound and that is benefiting natural gas.”
Natural gas for May delivery rose 3.9 cents, or 0.9 percent, to settle at $4.199 per million British thermal units on the New York Mercantile Exchange. Prices have risen 14 percent from a year ago.
Other energy commodities and stock markets were also higher today. Crude oil for May delivery rose $1.79, or 2.1 percent, to $85.84 a barrel after an Energy Department report showed an unexpected decline in inventories. The Standard and Poor’s index of 500 companies gained for a fifth day, rising 0.9 percent.
CSX Chief Executive Officer Michael Ward said in an interview with CNBC that the company is “seeing a good, gradual increase in the economy.”
Consumer Data
Purchases by consumers rose 1.6 percent in March, the most in four months, the Commerce Department figures showed. The gain topped a forecast increase of 1.2 percent from economists in a Bloomberg survey.
“It’s fair to say there’s more positive sentiment,” Brad Florer, a trader at Kottke Associates Inc., a commodity futures broker in Louisville, Kentucky.
Technical indicators are signaling that gas may rally after prices dipped below $4 in recent days before rebounding, Florer said.
“When gas prices hung in there overnight, you’re seeing some buying this morning,” he said. “We may make a push toward the mid-$4.30s.”
Abundant supplies will probably limit gains for natural gas, Florer said.
A weekly report on gas stockpiles tomorrow from the Energy Department may show a bigger-than-average inventory increase.
Supply Report
The department will probably say stockpiles advanced 81 billion cubic feet last week, based on the median of 19 analyst estimates compiled by Bloomberg. The five-year average gain is 21 billion. Last week’s report showed a 12 percent supply surplus amid mild weather and sluggish industrial consumption.
“Gas is rallying rather impressively despite weak fundamentals, rising nuclear output and expectations for a sizeable build in tomorrow’s report,” Michael Fitzpatrick, vice president of energy at MF Global in New York, said in a note to clients.
The buying is probably “more short-covering than a casting of a vote on the future of gas,” he said.
Hedge-fund managers and other large speculators increased their net-short position by 4 percent in New York natural gas futures in the week ended April 6, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 185,592 contracts, the Washington- based commission said in its Commitments of Traders report. Net- short positions rose by 7,735 contracts from a week earlier.
Technical analysis show that there “appears to be a discernable bottom installed on the chart, traced out by the congestion near $4,” Fitzpatrick said.
--With assistance from Timothy R. Homan in Washington, Ed Dufner and Margot Habiby in Dallas and Bill Koenig in Southfield, Michigan. Editors: Bill Banker, Charlotte Porter
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
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