US natural gas prices surge as heat wave drives cooling demand

By CHRISTINE BUURMA
Bloomberg

Natural gas futures rose for a second day as meteorologists predicted blistering heat that would spur demand from power plants.

Temperatures may be above normal in the Northeast, Great Lakes region and South through Aug. 1, MDA Weather Services said. New York’s high is forecast to reach 95 degrees Fahrenheit (35 Celsius) on Wednesday, 11 more than average, data from AccuWeather show.

“The Northeast is just going to be cooking,” said Bob Yawger, director of the futures division at Mizuho Securities in New York. “Temperatures are going to be significantly above normal for the whole week, and gas demand is going to be elevated.”

Natural gas for August delivery rose 3.2 cents to settle at $2.821/MMBtu on the New York Mercantile Exchange. Volume for all futures traded was 14% below the 100-day average at 2:41 p.m.

Houston may reach 102 degrees on Friday, 9 above normal, AccuWeather said on its website. Power plants account for 33% of gas demand in the US, government data show.

Gas deliveries to electricity generators were up 25% from a year ago through Tuesday, according to LCI Energy Insight in El Paso, Texas.

Power-plant demand for gas may jump 13% this year to 25.22 billion cubic feet/day in response to low prices, according to the US Energy Information Administration’s monthly Short-Term Energy Outlook on July 7. Industrial use is forecast to rise 3.3% to 21.67 billion.

Shale Basins

Gas production from the seven largest US shale basins will fall 0.6% to 45.1 billion cubic feet/day in August from a month earlier, the biggest drop since March 2014, the EIA said July 13 in its monthly Drilling Productivity report. Estimates have shown supply declines since June.

EIA data scheduled for release on Thursday in Washington may show an inventory gain of 56 billion cubic feet for the week ended July 24, based on the median of five analyst estimates compiled by Bloomberg. The five-year average increase for the period is 48 billion.

Kinder Morgan, the largest US pipeline operator, plans to more than double the size of a natural gas line into Mexico to meet rising demand for the fuel.

Kinder Morgan will offer firm transportation capacity on the Mier-Monterrey pipeline in an auction from Aug. 13 to Aug. 22, the company said Tuesday in a statement. The Houston-based company wants to expand the line by 700 million cubic feet/day to 1.34 billion cubic feet/day.

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