U.S. Gas Rises to 2-Month High Amid Storm, Hot Weather Outlook

U.S. natural gas futures climbed to a two-month high as unseasonably hot weather boosted demand from power plants and a tropical storm in the Gulf of Mexico curtailed gas production.

Above-average warmth is expected across much of the central and eastern U.S. Sept. 5 through Sept. 9, according to the Weather Company. Meanwhile, Tropical Storm Hermine has led drillers to evacuate platforms, slashing the region’s gas production by 11 percent, according to a government report.

Intense summer heat pushed gas demand from electricity generators to a record, cutting a supply surplus for 20 straight weeks and raising the odds that gas inventory levels could be below average at the start of the winter. This comes as natural gas output has fallen as low prices force operators to cut expenses.

"The tropical storm has been an issue when you consider inventory gains have been below average," Phil Flynn, senior market analyst at Price Futures Group, said by phone Wednesday. "The temperature forecast for September could be above normal so we could see the market get tighter."

Gas futures for October delivery gained 6 cents, or 2.1 percent, to $2.887 per million British thermal units on the New York Mercantile Exchange, the highest settlement since July 1. Prices rose 0.4 percent this month.

Hermine has shut about 360 million cubic feet a day of Gulf gas output, according to the according to the Bureau of Safety and Environmental Enforcement. The region accounts for for about 5 percent of U.S. production.

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