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Natural Gas Climbs to Five-Month High on Outlook for Hot Weather

Natural gas futures jumped to a five-month high in New York on forecasts for hotter-than-normal weather that would boost fuel demand from power plants.

Gas advanced as much as 6.5 percent as MDA EarthSat Weather in Gaithersburg, Maryland, predicted above-normal temperatures across most of the continental U.S. through July 11. The high in Chicago tomorrow may be 101 degrees Fahrenheit (38 Celsius), 18 above normal, according to the National Weather Service in Silver Spring, Maryland.

“The main market driver is this heat and increased cooling needs in the coming weeks,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Prices have some momentum but we’ll need to see six weeks of these kinds of temperatures to push gas above $3.”

Natural gas for July delivery gained 9.2 cents, or 3.3 percent, to $2.859 per million British thermal units at 11:53 a.m. on the New York Mercantile Exchange after rising to $2.946 per million Btu, the highest intraday price since Jan. 10. Gas has climbed 50 percent since falling to a 10-year intraday low of $1.902 per million Btu on April 19.

July gas futures expire today. The more actively traded August contract gained 8.9 cents, or 3.2 percent, to $2.896 per million Btu.

The weather will be hotter than normal in the Northeast through June 25, according to MDA EarthSat Weather in Gaithersburg, Maryland. Cooling demand in the U.S. may be 7 percent above normal on June 23, data from Weather Derivatives in Belton, Missouri, show.

New York

The high in New York tomorrow may be 90 degrees Fahrenheit, 7 higher than the usual reading, according to the National Weather Service, which issued heat advisories from Nebraska to Ohio and from Minnesota to Texas.

Electricity producers account for about 36 percent of U.S. gas consumption, according to the Energy Department.

Current natural gas prices aren’t sustainable, Rex Tillerson, chief executive of Exxon Mobil Corp., the largest U.S. natural gas producer, said at the Council on Foreign Relations in New York today.

Energy producers are “losing our shirts” amid low gas prices, Tillerson said.

Energy Department data scheduled for release tomorrow at 10:30 a.m. in Washington may show gas inventories climbed 53 billion cubic feet in the week ended June 22, according to the median of 19 analyst estimates compiled by Bloomberg. The five- year average increase is 85 billion, department data show.

Gas Production

The department cut its forecast for natural gas output in 2012 by 1 percent in the June 12 monthly Short-Term Energy Outlook. Marketed gas production will average 68.47 billion cubic feet a day this year, down from 69.14 billion estimated in May, the department said.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $2.55 per million British thermal units, up from the previous estimate of $2.45, according to the report.

The number of rigs drilling for natural gas in the U.S. fell by 21 to 541 last week, the lowest count since August 1999, according to data released June 22 by Baker Hughes Inc. in Houston.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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