Natural gas futures rose for a second day amid speculation that warmer weather later this month will boost demand for the power-plant fuel.
A midday update to the government’s weather forecasting model showed temperatures may climb higher than previously projected in parts of the Midwest June 7 through June 11, according to MDA Weather Services. The high in Chicago on June 8 may be 82 degrees Fahrenheit (28 Celsius), 4 more than usual, AccuWeather Inc. said.
Prices rebounded after dropping to $2.60 per million British thermal units, near a one-month low, as traders who were short futures moved to cover their positions, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.
“As we get better guidance for the next week, it appears that there are warmer changes that are occurring in the Midwest,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “There’s a possibility that some will read into a more constructive model update.”
Natural gas for July delivery advanced 4.9 cents, or 1.8 percent, to settle at $2.698 per million Btu on the New York Mercantile Exchange. Volume for all futures traded was 5.8 percent below the 100-day average at 2:55 p.m. Prices dropped to $2.599 in earlier trading, the lowest intraday price since April 30, before moving higher.
“We gave $2.60 a good test, there was a certain degree of support,” Yawger said. “I think you are getting short covering at that failure to get below $2.60.”
Natural gas demand from power plants may climb 13 percent this year to 25.21 billion cubic feet, the Energy Information Administration said May 12 in its monthly Short-Term Energy Outlook. Industrial consumption may rise 4 percent to 21.81 billion a day.
Temperatures may be higher than previously forecast next week in Texas, the South and parts of the East Coast, according to Commodity Weather Group LLC. The high in Washington on June 12 may be 90 degrees Fahrenheit, 7 more than usual, AccuWeather Inc. said on its website.
Power plants account for 33 percent of gas demand in the U.S., Energy Information Administration data show.
“I think that today’s rally is a short-term response to a slightly oversold market,” Viswanath said in an e-mail.