Natural Gas Rises as Commodities Rebound From Global Selloff

Updated on
  • Warmer weather could put a dent in fuel's inventory glut
  • Gas gain is part of `a broader wave of commodity buying'

Natural gas futures gained for the first time in three days, rebounding from an 11-week low Monday amid a global rout in commodities, as hotter weather may spur demand from power plants.

Temperatures in New York may reach 89 degrees Fahrenheit (32 degrees Celsius) on Aug. 29, 8 above normal, according to AccuWeather Inc.

The heat may put a dent in a gas glut while traders claw back some of yesterday’s across-the-board losses stemming from a currency devaluation in China, according to Bob Yawger, director of the futures division for Mizuho Securities USA Inc.

“Gas is just part of a larger asset class that’s attractive and the market is looking to rebound here,” Yawger said by telephone. “It’s part of a broader wave of commodity buying that is in the market today.”

Natural gas for September delivery rose 3.5 cents, or 1.3 percent, to settle at $2.685 per million British thermal unit on the New York Mercantile Exchange. Volume for all futures traded was 26 percent below the 100-day average at 2:45 p.m.

The Bloomberg Global Commodities Index, which measures returns in commodities futures rather than just tracking the prices of contracts, rose 0.5 percent to 86.2807 at 2:35 p.m. after dropping 2.2 percent Monday, the biggest decline in seven weeks.

Frenzied Drilling

Gas stockpiles totaled 3.03 trillion cubic feet as of Aug. 14. By the end of the injection season on Oct. 31, supplies may reach 3.867 trillion cubic feet, close to the previous record of 3.929 trillion set in November 2012, according to the U.S. Energy Information Administration.

Gas production will probably average 78.72 billion cubic feet a day this year as drilling continues in the Marcellus shale rock formation in the Northeast, the EIA said in its Aug. 11 Short-Term Energy Outlook.

Production may be “challenged” if oil prices remain low, according to Phil Flynn, a senior market analyst at Price Futures Group in Chicago. West Texas Intermediate crude futures increased 2.8 percent to $39.31 after falling Monday to their lowest level since 2009 on fears of slowing Chinese demand.

“We could see the industry take another hit when it comes to capital expenditure cuts,” Flynn said. “That could hurt some of the natural gas projects as well, if we stay in this price level in oil.”