Natural gas futures gained for a second day as forecasts showed hotter-than-normal weather in the U.S. East and South, boosting demand for the power-plant fuel to run air conditioners.
Gas advanced 2.7 percent as forecasters including Commodity Weather Group LLC in Bethesda, Maryland, said temperatures will be higher than normal through June 6. The East was cooler than normal last week, according to AccuWeather Inc. in
State College,
Pennsylvania.
“We get a little bit of heat out there and you are going to see things run up,” said Brad Florer, a trader at Kottke Associates Inc., an energy trading firm in Louisville,
Kentucky. “In the short term, we just can’t get outside of this range between $4 and $4.50.”
Natural gas for June delivery rose 11.6 cents to settle at $4.346 per million British thermal units on the
New York Mercantile Exchange. Prices are up 7.7 percent from a year ago.
Temperatures in the East will be about 4 degrees above normal next week, while
Texas may see higher temperatures in the upper 90s, according to MDA EarthSat Weather in Gaithersburg,
Maryland.
The high in New York on May 27 may be 80 degrees Fahrenheit (27 Celsius), 6 degrees above normal, according to
AccuWeather Inc. in State College, Pennsylvania. The high in
Dallas may be 88 degrees.
Scheduled natural gas deliveries to U.S. electricity generators rose for an eighth day on forecasts of warmer weather that may boost air conditioner use. Shipments to the Northeast advanced for a second day.
Pipeline Deliveries
A sample of scheduled gas deliveries to power plants in the U.S. and Canada shows shipments gained 1.5 percent to 14.9 million dekatherms (14.5 billion cubic feet), according to data compiled by Bloomberg as of 2:44 p.m. Shipments to power generators in the Northeast rose 16 percent to 1.7 million dekatherms.
Power plants use about 30 percent of the nation’s gas supplies, according to the Energy Department.
Gas advanced 3.3 percent on May 20, the most since April 28, as data showed the number of U.S. drilling rigs fell for a second week.
The rig count declined 8 to 866 last week, the lowest level since the week ended Jan. 29, 2010, according to Houston-based Baker Hugh Inc.
“Although we believe that gas drilling activity should have support at current levels from hedges that cover production and from rigs targeting ‘liquids-rich’ gas, the risk is for further reductions,” said James R. Crandell, an analyst with
Barclays Capital in New York, said in a note to clients today.
Cheniere Energy Inc. (LNG), the Blackstone Group LP-backed owner of a U.S. liquefied natural-gas terminal, said on May 20 that it won government approval to export the fuel to more countries.
LNG Exports
The Energy Department will allow Cheniere’s Sabine Pass terminal in
Louisiana to export as much as 803 billion cubic feet a year of U.S. gas. The decision expanded on a September 2010 ruling that permitted Cheniere to ship gas to 15 countries with Free Trade Agreements.
The decision “paves the way for the approval of exports from other terminals,” said Crandell.
Companies including Freeport LNG in Texas have also applied to export LNG.
Gas stockpiles gained 92 billion cubic feet in the week ended May 13 to 1.919 trillion cubic feet, the Energy Department said last week.
Storage levels were down 11 percent from a year earlier, narrowing from 12 percent the previous week, department data showed.
Gas futures volume in electronic trading on the Nymex was 268,936 as of 2:36 p.m., compared with the three-month average of 307,000. Volume was 275,548 on May 20. Open interest was 935,423 contracts. The three-month average open interest is 945,000.
The exchange has a one-business-day delay in reporting open interest and full volume data.