Natural gas futures rose, snapping a six-day losing streak, as forecasts showed hotter-than-normal weather in the U.S. South, boosting demand for the power-plant fuel for air conditioning.
Gas gained 2.2 percent as forecasters including MDA EarthSat Weather in Gaithersburg, Maryland, said temperatures will be as much as 14 degrees Fahrenheit above normal in the South and Midwest this week. Gas tumbled 12 percent in the previous six days on concern economic growth will slow, crimping fuel use.
“It’s very hot in the southern U.S. so there will be more air-conditioning demand,” said Peter Linder, president of the DeltaOne Energy Fund in Calgary. “The correction was overdone and traders are getting back in.”
Natural gas for June delivery rose 9.2 cents to settle at $4.246 per million British thermal units on the New York Mercantile Exchange. Prices are up 1.8 percent from a year ago.
“At $4.20 gas is cheap,” Linder said. “Prices may get back to the $4.40-to-$4.50 range.”
U.S. gas stockpiles rose 72 billion cubic feet in the week ended April 29 to 1.757 trillion cubic feet, 1 percent below the five-year average level, the Energy Department reported last week. Storage levels were down 11 percent from a year earlier.
Houston will have a high of 89 degrees Fahrenheit (32 Celsius) today, 5 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. Jacksonville, Florida, will have a high of 87 degrees.
Weather and Prices
“We’ve had six days of declines so any sign of hot weather could raise prices,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “Storage is below the five-year average, which means we may have reached the balance between supply and demand.”
Scheduled gas deliveries to U.S. power plants rose 2.6 percent to 15.1 million dekatherms (14.7 billion cubic feet), according to a sampling of gas pipeline nominations compiled by Bloomberg. Scheduled shipments to Florida for electricity generation rose 4.2 percent to 3.29 million dekatherms.
Power plants use 30 percent of the nation’s gas supplies according to the Energy Department.
Output Estimate
U.S. gas production in 2011 will average 63.23 billion cubic feet a day, down from 63.32 billion estimated in April, the Energy Department said in its monthly Short-Term Energy Outlook.
Gas prices at the Henry Hub in Erath, Louisiana, will average $4.24 per million Btu this year, up from $4.10 estimated in April.
Gas production will have month-to-month declines “through the year because of reductions in the number of active natural gas drilling rigs,” the department said in the report.
U.S. gas rigs gained 8 to 890 last week, according to Houston-based Baker Hughes Inc. The rig count is 6.6 percent lower than a year ago.
Gas futures volume in electronic trading on the Nymex was 231,986 as of 2:39 p.m., compared with the three-month average of 316,000. Volume was 309,561 yesterday. Open interest was 977,380 contracts. The three-month average open interest is 943,000.
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