U.S. Gas Surges to 10-Month High on Spreading Heat, Supply Cuts

  • Gas futures headed for biggest monthly rally since 2009
  • Pipeline disruptions limiting supplies in U.S. East, Gulf

U.S. natural gas futures surged to the highest level in 10 months amid forecasts for sweltering heat and on speculation that a series of pipeline disruptions will curb supplies in the market.

Most of the contiguous U.S. is in store for hotter-than-normal weather from July 8 through July 12, according to MDA Weather Services. The high in Chicago on July 11 may reach 95 degrees Fahrenheit (35 Celsius), 10 degrees higher than average, data from AccuWeather Inc. show.

The heat is hitting just as an explosion at an Enterprise Products Partners LP gas plant in Mississippi fire curbs supplies, shutting at least two oil and gas platforms in the Gulf of Mexico. A previous explosion on a massive Spectra Energy Corp. gas pipeline in the eastern U.S. and flooding in West Virginia have already limited flows. They’re combining to help lift gas futures from a 17-year low, setting the stage for the fuel’s biggest monthly rally since 2009.

“You have supply disruptions, we’ve already seen production weaken a bit this year, and we are seeing forecasts for hot weather,” Kent Bayazitoglu, an analyst at Gelber & Associates in Houston, said by phone. “That’s putting fuel in the fire, adding a little support to the rally.”

Natural gas for July delivery rose 20.1 cents, or 7.4 percent, to $2.917 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Aug. 12. It was the market’s biggest one-day gain by percentage since May 27.

Price Spike

“If we do see highs above 90 degrees, we could see prices continuing to spike,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The biggest factor supporting the market is the slide in the inventory surplus.”

U.S. gas inventories rose 62 billion cubic feet in the week ended June 17, below the five-year average gain for that period of 88 billion cubic feet, Energy Information Administration data show.

The gas contract for July delivery expired on Tuesday. The more actively traded August contract climbed 14.9 cents, or 5.4 percent, to $2.89.

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