Washington – Natural-gas futures surged 14 percent to a near six-month high Monday, rallying on strong demand from power producers amid scorching temperatures across the Midwest and Northeast.
The U.S. heat wave drove up demand for natural-gas-fired electricity as consumers cranked up their air conditioners. Many utilities asked homeowners to conserve electricity.
September natural-gas futures jumped $1.027 on the New York Mercantile Exchange, settling at $8.211 per 1,000 cubic feet – the highest close for front-month natural-gas futures since Feb. 3.
The upper Midwest and Plains were steamy, with heat warnings issued from Michigan to Oklahoma. Forecasts for above-normal highs were posted along the East Coast, where triple- digit readings were in the offing by midweek from the Carolinas through southern New England.
Jim Owen, a spokesman for the Edison Electric Institute, a Washington-based trade group, said there was a “fairly significant strain” on the nation’s power grid. Particularly vulnerable are the distribution lines, which heat up and sag as more juice flows in them, raising the risk of outages.
Although there were some unplanned nuclear power-plant outages in Michigan and Minnesota due to the heat, Owen said power generators and distributors appear to have enough capacity to meet demand.
Still, grid operators told utilities to be prepared to implement emergency procedures, while utilities asked their customers to conserve electricity by not setting their thermostats too low and by postponing the use of major appliances until the off-peak evening hours.
The EEI said last week that the U.S. set a record for electricity demand for the week ending July 22. The Energy Department last week surprised the market by reporting that U.S. inventories of natural gas shrank by 7 billion cubic feet. Supplies typically build during the summer.
Still, the country’s natural-gas inventory is well-above historical levels at 2.76 trillion cubic feet. The five-year average for this time of year is 2.27 trillion cubic feet.
Analyst Dan Lippe of Houston-based Petral Worldwide believes that, barring any major hurricane damage to platforms and pipelines, natural-gas prices could fall sharply in September.
“You will see (U.S.) storage facilities full well before the last week of October,” Lippe said.
Light sweet crude for September delivery rose $1.16 to settle at $74.40 on the New York Mercantile Exchange. September Brent crude futures at London’s ICE Futures exchange rose $1.76 to settle at $75.15 a barrel.
