Natural gas gained more Monday than any day since July–a break in a month-long slide from weather forecasts showing a hint of the below-normal temperatures that have been absent for weeks.
Natural-gas futures for December delivery settled up 13 cents, or 5%, at $2.749 a million British thermal units on the New York Mercantile Exchange. It is only the sixth winning session in the last month, a time at which futures prices have retreated from highs above $3.30/mmBtu.
Monday’s gains are largely weather-related, brokers and analysts said. Far above-normal temperatures still dominate the forecast through the end of the month–as they have during gas’s recent slide–but Monday’s updates for next week do show patches of normal and below-normal temperatures across the East.
That is a better sign for the gas market, which is reliant on winter heating for major demand. About half of all U.S. homes use natural gas for heat, and trading patterns throughout the autumn and winter are often determined by the amount of cold in weather forecasts.
“It is not cold enough to turnaround the market but it is cold enough to help prices recover,” Kent Bayazitoglu, analyst at the energy-consulting firm Gelber & Associates in Houston, said in a note. “For the past two weeks the market has priced in a mild winter that hasn’t even started yet.”
Bargain buyers may also be coming into the market. Several analysts and traders late last week said this would be a good time to buy now that prices have fallen 18% since they hit a nearly-two-year high a month ago. Stephen Schork, editor of energy trade publication the Schork Report, said Monday that he spent last week advising industrial consumers to hedge and buy at these low prices ahead of the winter.
Weather forecasts, do, however, show above-normal temperatures returning nationwide after next week. That could hurt a market that had been expecting that even an average winter could lead to higher prices because of growing demand from gas-fired power plants.
“It would really help if the weather was normal,” Scott Shelton, broker at ICAP PLC, said in a note.
