Bloomberg News

Canada Natural Gas Rises as U.S. 100-Degree Heat Enhances Demand

June 29, 2012

Canadian natural gas rose to the highest price in more than a month as hot weather that may boost demand from power plants for air conditioners was forecast for most of the U.S., Canada’s largest export market.

August gas in Alberta advanced 2.8 percent to the highest month-end price this year as most of Canada and the U.S. were expected to have temperatures 3 degrees Fahrenheit (2 Celsius) to 14 degrees higher than normal through July 8, according to MDA EarthSat Weather of Gaithersburg, Maryland.

“I still think there’s enough heat in the forecast to keep it up regardless of the storage concerns,” Carl Neill, a consultant with Risk Management Inc. in Atlanta, said in a telephone interview. “You just have so much heat out there for such an extended period of time, it will be difficult to sell it down too much until that abates.”

Alberta gas for August delivery increased 6 cents to C$2.215 per gigajoule ($2.06 per million British thermal units) as of 4:45 p.m. New York time on NGX, a Canadian Internet market. Gas traded on the exchange is shipped to users in Canada and the U.S. and priced on TransCanada Corp. (TRP)’s Alberta system.

Alberta gas has fallen 14 percent this year, from C$2.58 on Dec. 31, and advanced 36 percent in the second quarter, from C$1.625 at the end of March.

Natural gas for August delivery on the New York Mercantile Exchange rose 10.2 cents to settle at $2.824 per million Btu.

The Energy Department reported yesterday U.S. stockpiles grew by 57 billion cubic feet to 3.063 trillion in the week ended June 22. Inventories were 25 percent above the five-year average for the week, down from 27 percent the previous period.

Cooling Demand

Weather Derivatives of Belton, Missouri, predicted cooling demand will be 56 percent above normal in the Midwest, Canada’s largest export market, through July 6.

“The heat early on will contain ongoing opportunities for highs near or above 100 degrees Fahrenheit in St. Louis, where worsening drought will help enhance already hot conditions,” Travis Hartman, a meteorologist with MDA EarthSat, wrote today in a forecast for July 4 to July 8.

The high in St Louis today may be 104 degrees, 16 above normal, according to AccuWeather Inc. in State College, Pennsylvania. Temperatures of 100 or higher are forecast for that city through July 3, the service said.

Spot gas at the Alliance delivery point near Chicago fell 8.84 cents, or 3.1 percent, to $2.7983 per million Btu on the Intercontinental Exchange. Alliance is an express line that can carry 1.5 billion cubic feet a day from western Canada.

Spot Prices

At the Kingsgate point on the border of Idaho and British Columbia, gas fell 4.74 cents to $2.4565 per million Btu. At Malin, Oregon, where Canadian gas is traded for California markets, prices dropped 5.22 cents to $2.5899.

Volume on TransCanada’s Alberta system, which collects the output of most of the nation’s gas wells, was 16.4 billion cubic feet at 4:30 p.m. New York time.

Gas was flowing at a daily rate of 1.75 billion cubic feet at Empress, Alberta, where the fuel is transferred to TransCanada’s main line.

At McNeil, Saskatchewan, where gas is transferred to the Northern Border Pipeline for shipment to the Chicago area, the daily flow rate was 2.03 billion cubic feet.

The available capacity on TransCanada’s British Columbia system at Kingsgate was 617 million cubic feet. The system was forecast to carry 2 billion cubic feet today, or 76 percent of normal capacity of 2.62 billion.

The volume on Spectra Energy’s British Columbia system, which gathers the fuel in northeastern British Columbia for delivery to Vancouver and the Pacific Northwest, totaled 2.89 billion cubic feet at 3:50 p.m.

To contact the reporter on this story: Colin McClelland in Toronto at cmcclelland1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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