Natural Gas Advances as Heat May Boost Electricity Generation

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Natural gas futures climbed to the highest settlement price in more than two weeks as heat returned to the eastern U.S. after cool weather last week.

Temperatures may be above normal in the Southeast, Mid-Atlantic and Great Lakes region through June 23, MDA Weather Services said. Gas deliveries to power plants are up 22 percent from a year ago, according to LCI Energy Insight data.

“We’re going to see temperatures of about 5 to 10 degrees above normal extending at least into Saturday and Sunday,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “That’s going to put a bid into the market.”

Natural gas for July delivery rose 14.1 cents, or 5.2 percent, to $2.846 per million British thermal units on the New York Mercantile Exchange, the highest settlement since May 22. Volume for all futures traded was 79 percent above the 100-day average at 2:41 p.m.

The high in Atlanta on June 15 may be 91 degrees Fahrenheit (33 Celsius), 5 more than usual, AccuWeather Inc. said on its website. New York’s temperature may reach 85 degrees on June 12, 7 above normal.

“A combination of warmer weather heading over parts of the country along with a view that natural gas-related power demand will rise during the summer months as more coal plants are retired have been the main catalysts for the current move to the upside,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients Tuesday.

Production Estimate

The U.S. cut its estimate for 2015 marketed gas production to 78.96 billion cubic feet a day from 79.22 billion forecast in May, according to the Energy Information Administration’s monthly Short-Term Energy Outlook, released Tuesday. Supplies may climb 5.7 percent from 2014.

Demand for the fuel may rise 4.4 percent in 2015, driven by consumption by industrial users and power plants, the EIA said. Power plant demand for gas may expand 14 percent amid low prices. The generators account for 33 percent of gas demand.

Gas production from the seven largest shale reservoirs in the U.S. will slip by 221 million cubic feet a day to 45.6 billion a day in July from June, the EIA said Monday in its monthly Drilling Productivity Report. Gross gas output from the lower 48 states fell 0.3 percent in March from a month earlier to 80.87 billion cubic feet a day, the EIA said May 29 in the EIA-914 report.

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