Natural Gas Climbs to 3-Week High as June Heat May Boost Demand

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Natural gas futures rose to a three-week high as forecasts showed above-normal temperatures that would stoke demand from power plants.

The weather may be hotter than usual in the eastern third of the U.S. through June 24, MDA Weather Services said. Gas deliveries to power plants through Tuesday were up 20 percent from a year earlier, according to LCI Energy Insight in El Paso, Texas. Net-short wagers on gas almost tripled to 81,917 in the seven days ended June 2, the Commodity Futures Trading Commission said in a report Friday.

“There are expectations that we’ll continue to see elevated power-sector demand,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The risk of how summer could play out is putting pressure on the shorts.”

Natural gas for July delivery rose 4.5 cents to $2.891 per million British thermal units on the New York Mercantile Exchange, the highest settlement since May 21. Volume for all futures traded was 63 percent above the 100-day average at 2:42 p.m.

The high in New Orleans on June 18 may be 94 degrees Fahrenheit (34 Celsius), 4 above normal, AccuWeather Inc. said on its website. Washington’s temperature may reach 87 degrees, 2 more than usual.

Power plants account for 33 percent of gas demand in the U.S., Energy Information Administration data show.

Production Outlook

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

Consumption of the fuel may climb 4.4 percent in 2015, driven by demand industrial users and power plants, the EIA said. Electricity generators’ gas use, which accounts for 33 percent of demand, may expand 14 percent amid low prices.

Gas output from the seven largest shale reservoirs in the U.S. will fall 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 production from the lower 48 states slipped 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.

EIA data due Thursday in Washington may show that U.S. stockpiles expanded by 113 billion cubic feet in the week ended June 5, compared with the five-year average gain of 89 billion for the period, according to the median of 14 analyst estimates compiled by Bloomberg. Supplies were 1 percent above the five-year average in the seven days ended May 29.

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