Natural Gas Climbs for Second Day as Low Prices Boost Power Use

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Natural gas futures rose for a second day in New York on speculation that declining prices have prompted electricity generators to switch from coal.

Gas deliveries to power plants have climbed 12 percent from a year ago to 23.3 billion cubic feet a day, according to LCI Energy Insight in El Paso, Texas. Futures dropped to $2.511 per million British thermal units on Monday and on April 10, the lowest settlements since June 15, 2012.

“At these price levels, traders are looking at fuel switching from coal to natural gas,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “There’s some resistance to pushing the market below $2.50.”

Natural gas for May delivery rose 8 cents, or 3.2 percent, to settle at $2.61 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 10 percent above the 100-day average at 2:44 p.m. Prices are down 9.7 percent this year.

Electricity generation accounts for 32 percent of gas demand in the U.S., Energy Information Administration data show.

Gas consumption may climb 3.9 percent this year to average 76.34 billion cubic feet a day, driven by power plants and industrial users, the EIA said April 7 in its monthly Short-Term Energy Outlook report. Industrial demand may advance 5 percent to 22 billion a day as new plants that manufacture fertilizer and chemicals start up.

Atlanta Weather

Above-normal temperatures in the South may spur cooling demand through April 19, according to MDA Weather Services in Gaithersburg, Maryland.

The high in Atlanta on April 17 may be 74 degrees Fahrenheit (23 Celsius), 1 more than usual, AccuWeather Inc. said on its website. Houston may reach 01 degrees, 2 above average.

Natural gas inventories totaled 1.476 trillion cubic feet in the week ended April 3, 10.5 percent below the five-year average, EIA data show.

RBC Capital Markets LLC cut its estimate for average 2015 gas prices to $2.97 per million Btu from $3.25, citing an oversupplied North American market after a mild winter.

“Natural gas demand growth remains anemic among most segments of the U.S. economy and we forecast 2015 to be below 2014 for both residential and commercial demand, reflecting a return to normal weather,” analysts led by Kurt Hallead in Austin said in a note to clients Wednesday.

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