U.S. gas futures surge to seven-month high as hot weather holds
Jerry A. DiColo and Nicole Friedman, Dow Jones Newswires
NEW YORK--Natural gas futures jumped to a seven-month high Wednesday as forecasts warned that already scorching temperatures will likely continue through the end of July across much of the U.S.
Natural gas for August delivery on the New York Mercantile Exchange settled 17.7 cents, or 6.3%, higher, at $2.973 a million British thermal units (MMBtu). Wednesday's rally, which included a short spike above $3, was the largest one-day percentage gain in a month.
Weather forecasters are expecting another rise in temperatures across large parts of the country over the next week, signaling an increase in gas-fired electricity demand as consumers and businesses turn up their air conditioning.
"About the middle of next week we're going to be seeing a core of extreme heat," said Stephen Strum, president and lead meteorologist at Frontier Weather. He added that the Midwest and East Coast could see a short break in temperatures later this month before heating up again to start August.
MDA EarthSat on Wednesday said it expects a steady surge of hotter-than-normal temperatures in the Midwest and East over the next six to ten days, and the forecast for the next two weeks has "warmed slightly" in the Northeast.
Hot weather over the past month has led to a surge in natural gas futures from a low near $2.20/MMBtu in mid-June. In the past week, prices paused near the 200-day moving average as investors tried to gauge whether hot weather will continue to slow the growth of the massive U.S. gas-supply glut.
U.S. gas-inventory data from the U.S. Energy Information Administration is due 10:30 a.m. EDT Thursday. The EIA is expected to report gas inventories rose by 33-bcf in the week ended July 13, well below the 74-bcf five-year average increase for this time of year, according to a survey of analysts and traders.
If the estimate is correct, inventories will total 3.168 trillion cubic feet, just 18% above the five-year average. Earlier this year, inventories were roughly 60% above average.