Natural Gas Climbs to 8-Week High as Hot Weather Boosts Demand

Updated on

Natural gas futures advanced in New York to an eight-week high as forecasts showed hotter-than-normal weather that would boost demand from power plants.

Temperatures may be above average on the East Coast through May 26, according to MDA Weather Services in Gaithersburg, Maryland.

Fuel demand from power plants to run air conditioners has helped gas futures rebound 19 percent from a 34-month low in April. Gas deliveries to electricity generators have jumped 11 percent from a year ago, according to LCI Energy Insight in El Paso, Texas.

“We’re seeing some weather demand coming into the market,” said Dan Flynn, a trader at Price Futures Group in Chicago. “Gas futures had been completely oversold, so we’re starting to see more bullish sentiment.”

Natural gas for June delivery rose 9.5 cents, or 3.4 percent, to settle at $2.897 per million British thermal units on the New York Mercantile Exchange, the highest close since March 18. Volume for all futures traded was 41 percent above the 100-day average at 2:46 p.m.

The high in New York on May 19 may be 80 degrees Fahrenheit (27 Celsius), 8 more than average, AccuWeather Inc. said on its website. Washington temperatures may advance to 87 degrees, 11 higher than usual.

Power plants account for 32 percent of gas demand in the U.S., Energy Information Administration data show.

LNG Exports

Depending on market conditions, liquefied natural gas exports from the U.S. may reach 90 billion cubic meters a year (8.7 billion cubic feet a day) by early next decade, or about 12 percent of current dry gas production, Energy Secretary Ernest Moniz said Tuesday at the Group of Seven energy ministers’ meeting in Hamburg.

The government has approved about 60 billion cubic meters so far. Qatar, the world’s largest LNG exporter, ships about 100 billion cubic meters a year, Moniz said.

The G-7 energy ministers said an integrated global LNG market would thwart “single dominant” suppliers from cornering the gas market. The Ukraine crisis has shown that gas supply can be used for political coercion, destabilizing the energy security of an entire region, they said in a communique Tuesday.

Natural gas demand from electricity generators may climb 13 percent this year to 25.21 billion cubic feet a day from 2014, the EIA said Tuesday in its monthly Short-Term Energy Outlook. Industrial consumption may gain 4 percent to 21.81 billion.

Gas output from the seven largest shale deposits in the U.S. will drop by 112 million cubic feet a day to 46.2 billion a day in June from a month earlier, the EIA said Monday in its monthly Drilling Productivity Report.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE