Natural Gas Futures Rise Most in Two Months on Heat Forecasts

Aug 25, 2014 3:01 pm ET

Aug. 25 (Bloomberg) -- Natural gas futures climbed the most in two months on forecasts for above-normal temperatures that would spur demand for the power-plant fuel, slowing the pace of supply restocking.

Hotter-than-usual weather may blanket parts of the eastern and central U.S. through Sept. 3, said MDA Weather Services in Gaithersburg, Maryland. Gas inventories were 17 percent below the five-year average in the seven days ended Aug. 15, the biggest deficit for the time of year since at least 2005.

“The heat in the Midwest is nothing short of oppressive,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The market is really getting support from the shock of the hot temperatures. We’re going to go into winter with some of the tightest supplies we’ve had in a long time.”

Natural gas for September delivery rose 9.7 cents, or 2.5 percent, to $3.937 per million British thermal units on the New York Mercantile Exchange. The percentage gain was the biggest since June 12. Volume for all futures traded was 10 percent below the 100-day average at 2:45 p.m. Prices are up 13 percent from a year ago.

Net-long wagers on U.S. natural gas climbed in the seven days ended Aug. 19, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report released Aug. 22. Bullish bets rose 14 percent to 149,608, the first gain since June.

Adjusted Contracts

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract.

The high in Detroit tomorrow may be 88 degrees Fahrenheit (31 Celsius), 9 more than average, according to data from AccuWeather Inc. in State College, Pennsylvania. New York may reach 90 degrees on Aug. 27, also 9 more than usual.

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

“The late-inning heat wave gripping the South and Midwest has gotten the attention of the market,” Mike Fitzpatrick, the editor of the Energy OverView newsletter in New York, wrote today.

Gas deliveries to electricity generators have jumped 23 percent since June 21 to average 28.7 billion cubic feet as of Aug. 23, according to LCI Energy Insight in El Paso, Texas.

Gas inventories totaled 2.555 trillion cubic feet as of Aug. 15 compared with 3.063 trillion at the same time last year.

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 Aug. 12 in its monthly Short-Term Energy Outlook report. Stockpiles may total 3.463 trillion cubic feet at the end of October, the lowest start to the peak heating season since 2008.