GAS Futures Rise on U.S. Heat Wave
Source: Dow Jones, Amy D'Onofrio (7/12/11)
"Traders bet many Americans will need to stay inside to escape the heat."
Natural-gas futures rose slightly Tuesday as a heat wave moved in over the eastern half of the country.
Natural gas for August delivery recently traded up $0.013, or 0.3%, to $4.301 a million British thermal units on the New York Mercantile Exchange.
Traders bet many Americans will need to stay inside to escape the heat, likely requiring more natural gas to be burned to generate electricity to power air conditioning. The fuel accounts for about a quarter of U.S. electricity generation.
Above-normal temperatures are expected across the Midwest and East as excessive heat warnings and advisories are in effect from Texas eastward to the Mid-Atlantic states, according to the National Weather Service.
Heat combined with humidity is expected to make many cities in the southern half of the country feel like the temperature is above 100 degrees.
The central U.S. will see more above-normal heat according to MDA EarthSat Weather's forecast for next week. The most intense heat may be seen across the northern Plains, the private forecaster said.
A break from the heat later in the week could lead to lower prices; there aren't storm threats to production in the Gulf of Mexico and production remains high, Kilduff Group energy analyst Mike Fitzpatrick said.
"Natural gas is hampered by the burden of oversupply and not enough demand," said Jay Levine, president of Enerjay LLC.
Futures are bouncing off of a $4.25 support area, where there's good technical support, he said.
The Energy Information Administration will release its Short-Term Energy Outlook later Tuesday, which will include forecasts for natural-gas production and consumption.
Levine said he puts little emphasis on reports like this one, as it tends to mirror existing fundamentals for natural gas.
"The market tends to have a knee-jerk reaction to any report," he said.