Natural Gas Rises as Forecast for Hot Weather Signals Higher Fuel Demand
Natural gas futures rose for the first time in nine days as higher-than-normal temperatures were forecast for the U.S. Northeast, boosting demand for air conditioning.
Gas climbed as temperatures in New York are forecast to reach a high of 94 degrees Fahrenheit (34 Celsius) today, compared with an average of 80, according to the National Weather Service. Temperatures are predicted to reach 96 degrees in Washington, 90 in Boston and 89 in Chicago.
“The heat is a major factor here,” said Peter Beutel, president of energy adviser Cameron Hanover Inc. in New Canaan, Connecticut. “We have some hot weather that’s going to give us decent demand.”
Natural gas for October delivery gained 10.7 cents, or 2.9 percent, to settle at $3.812 per million British thermal units on the New York Mercantile Exchange. It was the biggest gain since July 15.
Hot weather has helped erode a supply surplus compared with five-year average inventories. The surplus peaked in April at 18.8 percent above the five-year average and declined to 6.2 percent the week ended Aug. 20.
In July, New York and the rest of the U.S. Northeast experienced high temperatures that drove energy use close to record levels as people used air conditioners to cool off. New York set its third-highest hourly peak electrical load, 33,542 megawatts on July 6, according to the New York Independent System Operator in Rensselaer, New York.
New York Heat
The heat that descended on the U.S. East Coast yesterday is forecast to affect New York City all week, according to the National Weather Service. High temperatures in Central Park are expected to be 11 to 15 degrees Fahrenheit above normal through the end of the work week, said Joe Pollina, a weather service meteorologist in Upton, New York.
“The relentless storms and the warm weather has the market rethinking the short side,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “Right now, the focus is on the heat and the hurricanes rather than the oversupply and no demand.”
The National Hurricane Center said today that Earl, the third hurricane of the Atlantic season that runs from June through November, strengthened into a major hurricane with winds of 120 miles an hour, a Category 3 storm on the five-step Saffir-Simpson scale. The hurricane isn’t expected to threaten the Gulf of Mexico, which produces 10 percent of U.S. natural gas.
Fiona’s Next
Trailing Earl is an area of disturbed weather the National Hurricane Center says has a 90 percent chance of becoming a storm in the next two days. The next storm, once it reached winds of 39 miles per hour, would be called Fiona.
Another weather front has just moved off Africa and that may well become Hurricane Gaston, said Jim Rouiller, a senior energy meteorologist at Planalytics Inc, a commercial forecaster in Berwyn, Pennsylvania.
“People definitely realize now that we’re turning into a hyperactive season and the threats made before the season are starting to be realized,” Rouiller said.
The most active part of the Atlantic hurricane season is from Aug. 20 to about Oct. 20, according to William Gray, who pioneered seasonal forecasts at Colorado State University in Fort Collins.
Natural gas has fallen 31 percent this year on speculation that stockpiles will reach near record highs by the end of October. U.S. gas inventories at the end of October will climb to 3.752 trillion cubic feet, according to the Energy Department. Stockpiles rose to a record 3.84 trillion in November 2009.
To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net
Rate this Page