Natural Gas Gains a Second Day on Forecasts for Warmer Weather

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Natural gas futures climbed for a second day on speculation that above-average temperatures will boost demand for the power plant fuel.

Forecasts for the Northeast and parts of the Midwest turned hotter July 20 through July 24, according to MDA Weather Services in Gaithersburg, Maryland. The high temperature in New York on July 23 was forecast to be 88 degrees Fahrenheit (31 Celsius), 4 above normal, AccuWeather Inc. said.

“The outlook for the summer season seems to be intensifying,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said in a phone call Friday. “We are getting some support from that.”

Natural gas for August delivery rose 4.4 cents, or 1.6 percent, to settle at $2.77 per million British thermal units on the New York Mercantile Exchange, posting the largest daily gain since June 25.

Gas deliveries to power plants have climbed 13 percent from a year ago to 30.1 billion cubic feet a day, according to LCI Energy Insight in El Paso, Texas. Electricity producers will account for 47 percent of U.S. gas demand in the third quarter, government data show.

Gas demand for power may rise above 34 billion cubic feet Monday as above-normal temperatures return to the biggest regional consumers in the Northeast, Southeast and West, Trevor Sikorski, an analyst at Energy Aspects in London, said in a note to clients.

Gas Demand

Natural gas consumption for space cooling will probably be above normal July 15 through July 23, Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients.

“With the temperatures getting a tad warmer, this could be the short-term catalyst that sends the spot nat gas price above its current trading level,” Chirichella said.

Natural gas-fired generators will account for 31 percent of the electricity supplied to the grid in 2015, up from 27 percent in 2014, data on the Energy Information Administration website showed.

Warmer-than-normal weather may curtail additions of natural gas to inventories, Timothy Evans, an energy analyst at Citi Futures in New York, said in a client note.

Prices are gaining, “supported by the forecast for seasonally warmer temperatures in coming weeks that will limit storage injections to near five-year average levels,” Evans said.

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