U.S. Gas Bulls Are Counting on This Heat Wave for a Price Rally

  • Heat wave is coinciding with declining U.S. gas production
  • Five of 12 analysts expect natural gas prices to gain

The heat that’s gripping parts of the eastern U.S., prompting power plants to burn record volumes of natural gas, has traders banking on a rebound in the market.

Five of 12 analysts and traders surveyed by Bloomberg expect gas prices will gain while four see them little changed. The rest predicted futures would continue their retreat.

Above-normal temperatures surpassing 90 degrees Fahrenheit (32 Celsius) this week from Manhattan to Chicago stand to rescue gas bulls from an 8 percent slide in prices so far this month. Gas deliveries to electricity generators have jumped to an all-time high, PointLogic Energy data show, as people blast air conditioners to keep cool.

The boost from warmer weather coincides with a decline in gas production as the number of drill rigs targeting the fuel has plunged. Last week’s gain in supplies was well below-average, extending a trend that has dominated the stockpiling season that typically runs through the summer, according to the U.S. Energy Information Administration.

“We are on pace for one of the worst injection seasons on record,” Chris Jarvis, president and director of research at Caprock Risk Management LLC in Frederick, Maryland, said Thursday. “The storage glut being worked off rather quickly while new supplies for gas are at a crawl gives us reason to have a bullish posture on the market.”

Widespread heat will persist across most of the lower 48 states over the next five days, according to MDA Weather Services. 

Gas futures were down 6.4 cents, or 2.3 percent, so far this week, settling Thursday at $2.692 per million British thermal units on the New York Mercantile Exchange.

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