U.S. Gas Soars to 21-Month High on Outlook for Power Demand

U.S. natural gas futures surged to a 21-month high as forecasts showed unseasonably high temperatures that would prop up demand for the power-plant fuel, trimming a supply glut.

Gas climbed 4.7 percent as meteorologists predicted warmer-than-normal weather across most of the lower 48 states from Oct. 12 to Oct. 21. Meanwhile, traders are speculating that Hurricane Matthew will cause fewer power outages in the U.S. Southeast than expected, keeping gas demand elevated as air conditioners hum, according to Price Futures Group.

Gas has been the best performer in the Bloomberg Commodity Index so far this quarter as an inventory surplus to the five-year average contracts, boosting chances that supplies will fall below normal just as wintry weather stokes demand. Electricity generators have burned record amounts of gas amid hot weather, limiting gains in stockpiles of the fuel.

“The warmer temperatures are adding cooling demand,” Phil Flynn, senior market analyst at Price Futures Group, said by phone Friday. “The latest forecasts seem to suggest the amount of power outages are not as big as feared” from Hurricane Matthew, he said.

Gas futures for November delivery jumped 14.4 cents to $3.193 per million British thermal units on the New York Mercantile Exchange, reaching the highest settlement since Jan. 14, 2015. Futures advanced for the fifth straight day, posting the biggest weekly gain since August.

Hurricane Matthew was earlier downgraded to Category 3 with winds of 115 miles (185 kilometers) an hour. Nearly a million Florida homes and businesses lost power as Hurricane Matthew churned offshore, sparing the state a direct hit.

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