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Natural Gas Rises From 6-Month Low on Cooling Demand
By Christine Buurma - Jul 11, 2014 3:30 PM ET

 

Natural gas futures climbed from a six-month low in New York as forecasts
showed above-normal temperatures that would boost demand for the power-plant
fuel.


MDA Weather Services in Gaithersburg, Maryland, predicted hotter-than-usual
weather on the East Coast from July 21 through July 25. Gas stockpiles were 28
percent below the five-year average in the week ended July 4, the biggest deficit
for the time of year in government data going back to 2005.


“We still have the last two weeks of July and then August and September ahead of
us for cooling demand,” said Gene McGillian, an analyst and broker at Tradition
Energy in Stamford, Connecticut. “The storage deficit has been a little bit of an
albatross for the market.”


Natural gas for August delivery rose 2.6 cents, or 0.6 percent, to settle at $4.146
per million British thermal units on the New York Mercantile Exchange. Volume
for all futures traded was 27 percent below the 100-day average at 2:52 p.m. Gas
slid to $4.106 per million Btu in earlier trading, the lowest price since Jan. 10.
Futures dropped 5.9 percent this week, the fourth straight weekly decline.


Gas inventories totaled 2.022 trillion cubic feet in the seven days ended July 4, the
least since 2003 for the period, according to the Energy Information
Administration, the Energy Department’s statistical arm. Consumption may climb
1.5 percent this year to 72.37 billion cubic feet a day, led by industrial users, the
EIA said July 8 in its monthly Short-Term Energy Outlook.


Price Outlook
The EIA boosted its forecast for average 2014 natural gas prices to $4.77 per
million Btu from $4.74 in last month’s report.


“The biggest fundamental reaction to lower prices will come from fuel switching,”
Kent Bayazitoglu, an analyst at Gelber & Associates in Houston, said in a note to
clients today. “As prices head towards $4, power generators will begin switching
to gas.”


The high in New York on July 21 may be 91 degrees Fahrenheit (33 Celsius), 7
more than usual, according to AccuWeather Inc. in State College, Pennsylvania.
Atlanta temperatures may rise to 90 degrees, 2 above average.


Power plants account for 31 percent of gas consumption, according to the EIA.


Exelon Corp. (EXC), operator of the largest U.S. network of nuclear power
stations, has acquired a company that plans to export natural gas produced during
the shale boom.


The company bought a 96 percent stake in Annova LNG, a startup in the early
stages of building a $1.3 billion liquefied natural gas export terminal in
Brownsville, Texas, David Chung, founder of Annova and now an Exelon vice
president, said in an interview today. Chung, who retains a minority stake in
Annova, oversees Chicago-based Exelon’s liquefied natural gas business.


To contact the reporter on this story: Christine Buurma in New York at
cbuurma1@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Bill Banker, Charlotte Porter

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