Natural Gas Gains on ‘Big Burst’ of Hot Weather in U.S. East

Natural gas futures advanced to a 10-month high on forecasts of above-normal temperatures that may increase demand for the power-plant fuel.

Gas futures gained 2.6 percent after meteorologists led by Matt Rogers at Commodity Weather Group in Bethesda, Maryland, predicted a “big burst” of heat in the eastern U.S. this week. Temperatures may be as much as 8 degrees above normal in parts of the Midwest and Northeast through June 10, the company said in a note to clients today.

“We should be getting some weather-related buying,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We transitioned from winter to summer almost overnight, and air conditioners will be humming.”

Natural gas for July delivery rose 12 cents to $4.827 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since July 30. The futures have climbed 9.6 percent this year.

Gas futures must settle above and remain higher than $4.879, the six-month high reached on Jan. 24, before prices will breach $5 per million Btu, said Stephen Schork, president of Schork Group Inc., an energy advisory company in Villanova, Pennsylvania, in a note to clients today. Gas prices were last above $5 on Aug. 2.

Rising Global Demand

Global natural-gas use may rise more than 50 percent by 2035 to overtake coal as the second-most used fuel, the International Energy Agency said today in a report.

The assumptions for increased gas use are based on growing demand for the fuel in China, slowing growth of nuclear power, increased production of gas from so-called unconventional sources including shale, lower gas prices and rising use in transport, the Paris-based IEA said. Unconventional gas would account for 40 percent of the 1.8 trillion-cubic-meter gain in consumption.

Temperatures may be above normal in parts of the southern and western U.S. through June 20, Commodity Weather Group said.

The high temperature in El Paso, Texas, on June 10 may be 101 degrees Fahrenheit (38 Celsius), 6 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in New York may be 87, 9 above normal.

Cooling demand in the Northeast may be more than double the average level on June 10, said David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri, in a note to clients today.

Power plants use about 30 percent of the nation’s gas supplies, according to the Energy Department.

Tropical Weather

An area of showers and thunderstorms in the northwestern Caribbean Sea has a 50 percent chance of developing into a tropical cyclone within the next 48 hours, the National Hurricane Center said in a Tropical Weather Outlook at 2 p.m. today in Miami. The system was about 90 miles south-southwest of Grand Cayman.

The Gulf of Mexico accounts for about 8.4 percent of natural gas gross production in the U.S., according to the Energy Department.

Gross output includes gas used for repressuring, quantities vented and flared, and non-hydrocarbon gas removed in treating or processing operations.

AccuWeather increased its forecast on June 1 for the development of major hurricanes in the Atlantic Ocean this year. The company boosted its outlook for storms of Category 3 or higher to four from the three it predicted in March.

Colorado State’s tropical meteorology team, led by Phil Klotzbach and William Gray, also issued a forecast update that holds to an earlier outlook for five major hurricanes, those with winds of 111 mph (179 kph) or greater.

Gas futures volume in electronic trading on the Nymex was 316,707 as of 2:37 p.m., compared with the three-month average of 314,000. Volume was 268,146 on June 3. Open interest was 957,420 contracts. The three-month average open interest is 940,000.

The exchange has a one-business-day delay in reporting open interest and full volume data.

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