Natural gas rose for a third day in New York, the longest streak of gains in two months, as more seasonal August weather may bolster demand from power plants.
The futures climbed to a two-week high as forecasts for the lower 48 states turned warmer for the next two weeks, with heat sweeping Texas and a weaker cool front moving through the Midwest, said Commodity Weather Group LLC. A government report tomorrow may show a 16th straight week of above-average stockpile increases after the coolest June and July since 2009.
“It was so bad that the market was happy for seasonable weather; it seems ridiculous but as long as it is seasonable you can justify covering shorts,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “As you continue to inject so much gas into storage, you limit the upside.”
Natural gas for September delivery gained 3.6 cents, or 0.9 percent, to $3.933 per million British thermal units on the New York Mercantile Exchange, the highest settlement since July 18. Prices are up 19 percent from a year ago. The futures last rose for three consecutive days in the period ended June 6.
The outlook for warmer weather in central and eastern states through Aug. 20 will be countered by a “bigger pullback on western heat next week, with a much cooler change in California,” Matt Rogers, president of Commodity Weather in Bethesda, Maryland, said in a note to clients today.
California experienced its hottest June and July since 2006 while the lower 48 states saw their coolest weather for those months since 2009, based on energy demand and population, Rogers said.
Highs in Dallas will reach 100 to 104 degrees Fahrenheit (38 to 40 Celsius) Aug. 11 through Aug. 15, 3 to 7 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. San Francisco’s reading will climb to 80 degrees, 12 above normal, on Aug. 14 before dropping a week later to 69.
Gas stockpiles probably rose 83 billion cubic feet last week, based on the median of 17 analyst estimates compiled by Bloomberg. Forecasts ranged from increases of 79 billion to 91 billion. The five-year average gain for the week is 49 billion.
The U.S. Energy Information Administration is scheduled to release its weekly gas supply report tomorrow.
Inventories totaled 2.307 trillion in the week ended July 25, 22 percent below the five-year norm for the period, according to the EIA. The deficit has narrowed from a record 55 percent in March as stockpiles rebound at the fastest pace during the first half of the storage refill season, which is from April through October.
Output from the Marcellus shale in the Northeast topped 15 billion cubic feet per day for the first time last month, increasing from 2 billion four years earlier, the EIA said in a report yesterday. Gains are being driven by improved productivity as the rig count held steady at around 100 rigs over the past 10 months. New wells in August will add 600 million cubic feet per day.
“Production in the Marcellus Region surpassed winter demand for natural gas in Pennsylvania and West Virginia several years ago and is now on track to be enough to equal the demand in those states plus New York, New Jersey, Delaware, Maryland, and Virginia combined,” the EIA said.
Spot gas prices at major hubs in the Northeast and mid-Atlantic have been trading at the lowest seasonal levels on record on the Intercontinental Exchange on the surge in production and pipeline limits strand gas in the region.
The Dominion South Point pool, based on two separate gas lines that pass through parts of Ohio, Pennsylvania and West Virginia, slid below $2 per million Btu last week for the first time since April 2012. Prices rose 1.4 percent today to $2.40.
Chesapeake Energy Corp. (CHK:US) said second-quarter profits fell as the U.S. Northeast supply glut dragged down prices, according to a statement today. The gas producer said July 29 that the average price it received for the fuel plunged 51 percent to $2.45 per million Btu from a year earlier.
It could take a “couple of years” to build enough pipelines to handle the jump in production, Spectra Energy Corp. (SE:US) Chief Executive Officer Greg Ebel said in a telephone interview today. Spectra, which owns 22,000 miles (35,400 kilometers) of oil and gas pipes, is rushing to alleviate the glut that depressed prices, he said.
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