Natural Gas Halts 2-Day Slide as Heat May Boost Power Plant Use

Natural gas futures halted a two-day slide in New York as forecasts showed hotter weather that would spur power-plant demand before easing next week.

Gas rose 0.1 percent as MDA Weather Services said a surge of heat across the eastern U.S. over the next five days will give way to seasonal readings from June 22 through June 26. Prices yesterday jumped to a 16-week high before closing lower on the mixed weather outlook and speculation that a government report this week may show an above-average supply gain.

“After some volatility yesterday, the market is in a breather mode right now saying we need new information,” said Martin King, an analyst with FirstEnergy Capital Corp in Calgary. “The weather forecasts are bouncing back and forth and people are coming to a landing on storage expectations.”

Natural gas for July delivery rose 0.2 cent to $4.709 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 36 percent below the 100-day average at 3:23 p.m. The futures have advanced 11 percent this year.

Prices moved between gains and losses throughout the session, pivoting around the 100-day moving average of $4.708 per million Btu.

Gas traders attempted to push futures up through $4.80, but

“because we don’t have calls for sustained heat and elevated cooling demand, the market failed to get new longs,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We are also going to get selling pressure on the fact that we are going to get another triple-digit injection. That may be the last one.”

Washington Heat

The high temperature in Washington tomorrow will climb to 97 degrees Fahrenheit (36 Celsius), 12 above normal, before dropping a week later to 10 lower than average at 77 degrees, according to AccuWeather Inc. in State College, Pennsylvania. Cleveland’s reading will rise to 88 degrees, 9 higher than usual, and then slump to 74, 7 below normal, during the same period.

Electricity generators are the largest users of gas in the U.S., accounting for 31 percent of consumption, according to the Energy Department’s Energy Information Administration.

MDA in Gaithersburg, Maryland, predicted that heat will build again on the East and West Coasts from June 27 through July 1. Weather models turned milder for the central U.S., with seasonal readings for the period instead of the previous forecast for above-normal temperatures.

Stockpile Gain

Gas stockpiles probably expanded by 112 billion cubic feet last week, according to Tim Evans, an energy analyst at Citi Futures in New York. FirstEnergy’s King expects an increase of 108 billion. The five-year average increase for the period is 87 billion. The government is scheduled to release its weekly gas supply report on June 19.

U.S. inventories climbed by more than 100 billion cubic feet for five straight weeks, the longest string of triple-digit gains since June 2009. A sixth increase of that size would make it a record streak in government data going back to 1994.

Stockpiles totaled 1.606 trillion cubic feet in the week ended June 6, 35 percent below the five-year average for the period, according to the EIA. Storage levels will increase to 3.424 trillion by the end of October as gas production expands for the ninth straight year, the agency said in its June 10 Short-Term Energy Outlook.

Marketed output will rise 4 percent this year to 73 billion cubic feet a day, setting a record for the fourth consecutive year, as new wells come online at the Marcellus shale deposit in the Northeast, according to the outlook.

“The expectation is that there is more gas coming out of the Marcellus,” McGillian said. “If we do get calls of sustained heat, the market is going to continue to move higher.”

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