April 1 (Bloomberg) -- Natural gas futures advanced the most in two months after a government report showed that U.S. inventories increased less than analysts anticipated.
Stockpiles rose 12 billion cubic feet in the week ended March 26 to 1.638 trillion cubic feet, the Energy Department said. Analysts forecast a rise of 19 billion. Price gains accelerated as traders, who in mid-March held a record short position, bought contracts to cancel the bets on lower prices.
“People who are short are covering because they don’t want any surprises with a three-day weekend,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “Natural gas is also in a nice spot at $4 so if you want to start up a trade for the second quarter you’d buy it because you can get a good deal on it.”
Natural gas for May delivery rose 21.7 cents, or 5.6 percent, to settle at $4.086 per million British thermal units on the New York Mercantile Exchange, the biggest gain since Feb. 1. The futures touched $3.81, the lowest intraday price since Sept. 28, before the supply report was released at 10:30 a.m.
The exchange is closed tomorrow for Good Friday.
The $2.9 billion U.S. Natural Gas Fund rose 38 cents, or 5.5 percent, to $7.29 a share on the New York Stock Exchange one day after closing at the lowest price in its three-year history. The fund traded 518 million shares, the most since Jan. 14.
Speculators in New York futures were short a net 186,983 contracts in the week ended March 16, a record for the contract, according to Commodity Futures Trading Commission data. The net- sort position was 185,973 the following week, the most recent figures available.
Year-Earlier Comparison
U.S. gas inventories last week were down 16 billion cubic feet, or 1 percent, from a year earlier, today’s report showed. Supplies were 11 percent above the five-year average.
Gas also rose on anticipation of stronger industrial demand for the fuel, as the Institute for Supply Management’s factory index rose to 59.6 in March, the highest level since July 2004. Readings above 50 signal growth.
Fewer Americans filed claims for jobless benefits last week, bringing the average over the past month to the lowest level since 2008, the Labor Department reported.
“The market is still waiting for the recovery to trickle through to the jobs market,” said Chris Kostas, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. “Technically the market has become very oversold, and although we don’t expect prices to go significantly higher, we are expecting support at $4.”
March Weather
Mild weather in March brought an earlier-than-normal end to the withdrawal period for natural gas as heating demand waned. Inventories last week were 11 percent above the five-year average, up from 8 percent the previous week.
Inventories typically fall from November through March as demand exceeds production and imports.
Northeast weather will “remain unseasonably warm” from April 6 through April 10, according to MDA Federal Inc.’s EarthSat Energy Weather.
The temperature in Chicago will be 27.5 degrees above normal today and 26.5 degrees higher tomorrow, according to EarthSat. The city will have a high of 83 degrees Fahrenheit (28 Celsius) today and a low of 57.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 21.33 cents, or 5.4 percent, to $3.7171 per million Btu, according to data compiled by Bloomberg.
Gas futures volume in electronic trading on the Nymex was 298,899 contracts as of 3:04 p.m., compared with a three-month daily average total of 225,000. Volume was 243,615 yesterday. Open interest was 830,935 contracts, compared with the three- month average of 799,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
--With assistance from Shobhana Chandra in Washington and Asjylyn Loder in New York. Editors: Bill Banker, Richard StubbeTo contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
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