Natural gas rises on forecasts of below-normal temps

Natural gas futures rose for a second day in New York on forecasts of below-normal temperatures that may boost demand for the heating fuel.

Futures climbed as colder weather is likely in the Northeast, Southeast and Midwest from Dec. 7 through Dec. 16, according to Commodity Weather Group in Bethesda, Maryland. Prices fluctuated after the Energy Department reported a stockpile decline that was smaller than analysts predicted.

"This is a weather trade," said Gordon Elliott, a risk- management specialist with FC Stone LLC in St. Louis Park, Minnesota. "People are going to trade on the forecasts, whether they actually pan out or not."

Natural gas for January delivery rose 7.4 cents, or 1.7 percent, to settle at $4.343 per million British thermal units on the New York Mercantile Exchange. Gas futures have declined 22 percent this year.

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COLD WEATHER

Heating demand from Dec. 8 through Dec. 12 may be 15 percent above normal levels, according to David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri.

"Prices are still seeing a bit of support because of the cooler outlook coming in through mid-December," said Matt Smith, an analyst with Summit Energy in Louisville, Kentucky. "The forecasts are colder, especially for the key consuming regions of the Northeast and Southeast."

The low temperature in New York on Dec. 11 may be 26 degrees Fahrenheit (minus 3 Celsius), 5 degrees below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low temperature in Chicago may be 17 Fahrenheit, 7 degrees below normal.

"There will be a swath of snow with this system from the northern Plains to the middle Atlantic coast," wrote Paul Pastelok, senior forecaster for AccuWeather, in a note to clients. "Another press of cold will follow and could lead to a freeze into Florida."