Summer Heat Baking Eastern U.S. Boosts Natural Gas for Third Day

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Natural gas futures advanced for a third day as sweltering weather blanketed the U.S. Northeast, boosting demand from power plants to run air-conditioners.

Temperatures may be higher than average across the Northeast, Great Lakes region and South through Aug. 2, MDA Weather Services said. Philadelphia may reach 94 degrees Fahrenheit (34 Celsius) Wednesday, 7 above normal, according to AccuWeather Inc.

“These kinds of conditions produce a heavy cooling-demand load because of the humidity,” said John Kilduff, a partner at Again Capital LLC in New York. “Traders are wondering if this portends a hot August.”

Natural gas for August delivery rose 6.5 cents to settle at $2.886 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 17 percent below the 100-day average at 2:45 p.m.

The August gas contract expired today. The more actively traded September contract climbed 4.8 cents to $2.864 per million Btu.

The high in Dallas may be 102 degrees on Thursday, 5 above normal, AccuWeather said on its website. Electricity generators account for 33 percent of gas demand in the U.S., Energy Information Administration data show.

Gas deliveries to power plants were up 32 percent from a year ago through Wednesday, according to LCI Energy Insight in El Paso, Texas.

Power Plants

Electricity generation demand for gas may surge 13 percent this year to 25.22 billion cubic feet a day in response to low prices, according to the EIA’s monthly Short-Term Energy Outlook on July 7. Industrial use is forecast to advance 3.3 percent to 21.67 billion as new fertilizer and chemical plants are completed.

Gas output from the seven largest U.S. shale basins will slip 0.6 percent to 45.1 billion cubic feet a day in August from a month earlier, the biggest drop since March 2014, the EIA said July 13 in its monthly Drilling Productivity report. EIA estimates have shown supply declines since June.

EIA data scheduled for release on Thursday in Washington may show a stockpile gain of 55 billion cubic feet for the week ended July 24, based on the median of 13 analyst estimates compiled by Bloomberg. The five-year average increase is 48 billion for the period, while inventories rose by 88 billion a year earlier.

Gas at the benchmark Henry Hub in Erath, Louisiana, may average $2.70 per million Btu this year and $3 in 2016, Citigroup Inc. analysts including Anthony Yuen said in a note to clients Wednesday.

Cheaper natural gas “at the regional level should continue to make other coal plants uncompetitive versus gas-fired generation,” Yuen said.

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