Natural gas gains as heat sweeping eastern U.S. boost fuel use

By JONATHAN N. CRAWFORD on 7/27/2015

NEW YORK (Bloomberg) -- Natural gas futures rose after two days of declines on speculation that hotter weather in the eastern half of the U.S. will boost demand for the power plant fuel.

Temperatures from the Midwest to the East Coast will be above normal July 27 through the end of the month before giving way to more seasonal conditions, MDA Weather Services said. The high temperature in Washington was forecast to be 93 degrees F (34 degrees C) on July 29, 5 above normal, according to AccuWeather Inc.

“There will be some sympathetic buying with the hot weather,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The weather forecasts seem to be hotter and hotter in the short term.”

Natural gas for August delivery gained 1.3 cents to settle at $2.789 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 36% below the 100-day average at 2:40 p.m.

Gas fell 3.3% last week, the largest weekly drop since May.

Average deliveries to power plants in July have jumped 20% from the same time a year ago to reach 32.3 BBcfgd, according to LCI Energy Insight.

Power generators will account for 33% of total natural gas consumption in 2015, up from 30% in 2014, the U.S. Energy Information Administration said in its Short-Term Energy Outlook on July 7.

Money managers’ net-short positions in U.S. natural gas decreased 37% to 42,002 in the week ended July 21, the Commodity Futures Trading Commission said July 24 in its weekly Commitments of Traders report. The measure includes an index of four contracts adjusted to futures equivalents.

LNG Terminal

“The market is still oversold and as such the market remains susceptible to another round of short covering at any time,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients.

The Federal Energy Regulatory Commission on July 24 authorized Excelerate Energy LP to construct its Aguirre Offshore GasPort Project, a floating liquefied natural gas import terminal, after finding the facility met environmental standards. The terminal will receive LNG shipments for delivery to Puerto Rico Electric Power Authority’s existing 1,492-mw Aguirre Power Complex in Salinas, Puerto Rico, which is being converted to run on both natural gas and fuel oil.

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