Natural Gas Climbs to 3-Week High on Outlook for August Heat

Aug 12, 2014 3:17 pm ET

Aug. 12 (Bloomberg) -- Natural gas futures advanced to a three-week high in New York as meteorologists predicted an August heat wave that would spur demand for electricity generation after a mild June and July.

Temperatures may be above normal across most of the lower 48 states from Aug. 17 through Aug. 21 after mild weather in the East this week, according to MDA Weather Services in Gaithersburg, Maryland. Last month was the coolest July for the contiguous U.S. since 2009, government data show.

“We haven’t had a sustained heat wave for some time,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’re flirting with $4, and that’s also bringing some buyers to the market.”

Natural gas for September delivery rose 0.9 cent to $3.974 per million British thermal units on the New York Mercantile Exchange, the highest settlement since July 16. Volume for all futures traded 18 percent above the 100-day average at 2:44 p.m. Prices are up 20 percent from a year ago.

The high in Washington on Aug. 21 may be 96 degrees Fahrenheit (36 Celsius), 10 above normal, according to AccuWeather Inc. in State College, Pennsylvania. St. Louis’s temperature may reach 98 degrees, also 10 more than usual.

Power plants account for 31 percent of gas demand, data from the U.S. Energy Information Administration show. The agency is the Energy Department’s statistical arm.

Power Plants

Gas deliveries to electricity generators jumped 15 percent since June 21 to 26.9 billion cubic feet today, according to LCI Energy Insight in El Paso, Texas. Gas inventories were 20 percent below the five-year average as of Aug. 1, the biggest deficit for the time of year since at least 2005.

U.S. gas consumption may climb 1.7 percent this year to 72.6 billion cubic feet a day, led by industrial users, the EIA said today in its Short-Term Energy Outlook report. Stockpiles may total 3.463 trillion cubic feet at the end of October, the lowest for the period since 2008.

AGL Resources Inc. and three partners plan to build a $1 billion pipeline to deliver natural gas from Pennsylvania’s Marcellus shale to New Jersey.

The PennEast Pipeline project involves a 100-mile (161 kilometer) line from Luzerne County in northeastern Pennsylvania to an interconnection in New Jersey, the companies said in a statement today. The pipeline will have a capacity of 1 billion cubic feet a day, enough to service 4.7 million homes.

Columbia Pipeline Group, a unit of NiSource Inc., will invest $1.75 billion in pipelines capable of transporting up to 1.5 billion cubic feet a day of gas from the Marcellus and Utica shale to markets served by the Columbia Transmission and Columbia Gulf systems, the company said today.

--With assistance from Jim Efstathiou Jr. in New York.