U.S. GAS PRICES RISE

Natural gas futures advanced in New York to the highest level in two weeks as concern eased that supplies would test storage limits before demand picks up with colder weather.

Gas rose 3.4 percent as the October contract expired. U.S. stockpiles gained 77 billion cubic feet last week, based on the median of 20 analyst estimates compiled by Bloomberg. Supplies totaled 3.496 trillion cubic feet as of Sept. 14, below the Energy Department's estimated capacity of 4.239 trillion. The agency's weekly supply report is scheduled for release tomorrow.

"The market continues to find some buying from the end-of- the-month expiration trading," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. "Without worries that we are going to see a flood of gas in the physical market if storage is full, the market can look a little more toward the winter heating season."

Natural gas for October delivery jumped 9.9 cents to $3.023 per million British thermal on the New York Mercantile Exchange, the first settlement above $3 since Sept. 13 and the biggest increase since Sept. 11. The futures have climbed 7 percent since June, heading for a second straight quarterly gain.

The November futures contract climbed 11 cents, or 3.5 percent, to 3.215 per million Btu.

November $3.50 calls, bets that prices will rise, were the most actively traded options in electronic trading. They rose 2 cents to 5.2 cents on volume of 788 at 2:50 p.m.

Gas has rebounded 59 percent from a decade low of $1.902 on April 19 as hotter-than-normal weather and fuel switching from coal spurred record demand from power plants.

Gas Plants

Electricity generators have been burning about 27.3 billion cubic feet a day of gas so far this month, up 21 percent from the same period last year, according to data from LCI Energy Insight, an energy analysis and consulting company in El Paso, Texas.

Temperatures from the Northeast and across the Midwest will be above normal Oct. 1 through Oct. 5, according to Commodity Weather Group LLC in Bethesda, Maryland. New York City's high on Oct. 3 may be 76 degrees Fahrenheit (24 Celsius) and Chicago may see a high of 78 degrees on Oct. 5, 11 above normal,

Cooling demand nationwide will be 13 percent above normal over the next seven days, Weather Derivatives in Belton, Missouri, said today.

Nuclear-power production is hovering near the lowest seasonal level in a decade as reactors were shut for refueling or unplanned work. Reactor maintenance shutdowns, usually undertaken in the U.S. spring or fall when energy use is lowest, can increase gas consumption for electricity generation.

Nuclear Plants

Generation fell 0.3 percent to 85,017 megawatts, or 84 percent of capacity, after dropping to 84,520 megawatts on Sept. 22, the least since June 4, according to filings with the U.S. Nuclear Regulatory Commission and data compiled by Bloomberg. Output was 5.8 percent lower than a year earlier.

"The main fundamental support is coming from the above- normal level of nuclear power generating facilities that are currently down," along with fuel switching from coal at power plants and the outlook for a more normal winter, Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today. Last winter was the fourth warmest on U.S. record.

Tomorrow's inventory report may be "slightly bearish" with the possibility that the injection number will exceed the historical norm, he said.

Stockpile Range

Estimates for the stockpile report for the week ended Sept. 21 range from gains of 69 billion to 84 billion cubic feet. The five-year average increase for the week is 76 billion and supplies rose by 104 billion the same week of 2011, Energy Department data show.

An inventory surplus in the week ended Sept. 14 narrowed to 8.6 percent to the five-year average for the week, declining each week since rising to six-year high of 61 percent on March 30, department data show.

Gas futures volume in electronic trading on the Nymex was 337,104 as of 2:51 p.m., compared with the three-month average of 370,000. Volume was 326,603 yesterday. Open interest was 1.07 million contracts. The three-month average is 1.11 million.

The exchange has a one-business-day delay in reporting full volume and open interest data.

bloomberg.com