BLOOMBERG BUSINESS

Natural Gas Climbs to 11-Week High on Outlook for Greater Demand

by Jonathan Crawford and Naureen Malik

May 13, 2015 — 9:34 AM EDT Updated on May 13, 2015 — 3:06 PM EDT


Natural gas advanced to an 11-week high on speculation that demand for the power-plant fuel
will rise.


Plants will burn 13 percent more gas this year to average a record 25.21 billion cubic feet a day,
according to data from an Energy Information Administration report Tuesday. The government
raised its estimate from 24.9 billion in last month’s outlook.


“At these levels it absolutely makes sense that consumption will be strong this summer,” Stephen
Schork, president of Schork Group Inc., a consulting firm in Villanova, Pennsylvania, said by
phone Wednesday. “Basically, there’s no reason to burn coal at these prices.”


Natural gas for June delivery gained 3.8 cents, or 1.3 percent, to settle at $2.935 per million
British thermal units on the New York Mercantile Exchange, the highest since Feb. 20. Volume
for all futures traded was 28 percent above the 100-day average at 2:44 p.m.


Power prices rebounded 18 percent from the 34-month low of $2.49 reached April 27 as money
managers exited some of their bearish bets, Tim Evans, an energy analyst at Citi Futures in New
York, said in a note to clients.


“While the storage data looks bearish, the market continues to draw support from short-covering
to correct what had been a significant oversold condition,” Evans said.


Speculators’ net-short positions in four benchmark gas contracts fell 43 percent to 72,225 futures
equivalents in the week ended May 5, Commodity Futures Trading Commission data show.


Plant Use
Gas-fired plants will account for 30.7 percent of U.S. power generation in 2015, up from 30.4
percent forecast last month, the EIA said.


Temperatures will be above normal on the East Coast through May 27, according to MDA
Weather Services in Gaithersburg, Maryland. The high in New York on May 27 may be 83
degrees Fahrenheit (28 Celsius), 9 more than average, AccuWeather Inc. said on its website.


Government data scheduled for release Thursday may show gas inventories rose by 117 billion
cubic feet last week, based on the median of 13 analyst estimates compiled by Bloomberg.
That’s compared with the five-year average change of 82 billion for the period and a gain of 101
billion in the same week last year.


FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND
MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES
MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY
RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT
IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE
RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL
DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED
IN THE PRICE OF THE UNDERLYING FUTURES.