Reuters - U.S. Natural Gas Futures Jump To 10-Month High On Hot Weather Forecasts

U.S. natgas futures jump to 10-month high on hot weather forecasts - Reuters News

28-Jun-2016 08:13:24 AM

June 28 (Reuters) - U.S. natural gas futures on Tuesday jumped to a 10-month high on forecasts for power demand to remain at record highs to keep air conditioners humming with the unusually hot start to the summer expected to last through at least mid July.

After rising 29 percent over the past five weeks due to the early summer heat, gas futures NGc1 for July delivery were at 8.9 cents, or 3.3 percent, at $2.805 per million British thermal units on its last day as the front-month at 9:07 a.m. EDT (1307 GMT).
August futures, which will soon be the front-month, were also up about 9 cents at $2.83.
Despite the recent rally, analysts said spot prices so far in 2016 have remained low to pressure producers to cut output and encourage generators to burn more gas instead of coal to prevent storage caverns from filling to maximum capacity after a warm winter left inventories at record highs.
Spot prices at the Henry Hub benchmark GT-HH-IDX have averaged $2.03 so far this year, while futures for the balance of 2016 NGBALst were fetching $2.95, a 10-month high. That compares with $2.61 in 2015, the lowest since 1999.
Analysts, however, said no one was expecting storage caverns to reach maximum levels this autumn because injections since April have remained low because the power sector was burning more gas and producers reduced output.
In early estimates, analysts forecast utilities added just 40 billion cubic feet of gas into storage during the week ended June 27. That compared with builds of 62 bcf in the prior week, 73 bcf a year earlier and a five-year average of 78 bcf.
The U.S. power sector has burned on average 26.1 bcf of gas per day so far in 2016, topping the record 23.9 bcfd of a year earlier, according to Thomson Reuters Analytics.
U.S. drillers, meanwhile, have reduced dry gas output in the lower 48 states to an average of 73.0 bcfd so far this year from a record 73.5 bcfd in 2015.
But with spot gas prices near their highest levels since August, the premium of gas futures over coal futures QLc1 remained over $1 per mmBtu for a seventh day in a row, pushing some power generators to switch back to coal.
Traders say it becomes profitable for some generators to burn coal, which is less efficient and carries higher environmental and transport costs, when the gas premium exceeds $1.

	Week ended June 24 (Forecast)	Week ended June 17 (Actual)	Year Ago	5-year Average
U.S. natgas storage (change in bcf):	40	62	73	78
Heating & Cooling Degree Days
Two-Week Total	Current Day	Prior Day	30-Year Norm
GFS HDDs	3	2	5
GFS CDDs	227	227	189
EC HDDs	3	3	4
EC CDDs	199	197	176
GFS Gas Consumption (bcfd)
Two-Week Average	Current Day	Prior Day	30-Year Norm
Residential	3.7	3.6	3.7
Commercial	4.4	4.4	4.4
Power	35.2	35.0	27.7
Industrial	19.8	19.7	20.5
Total	63.0	62.7	56.2
EC Gas Consumption (bcfd)
Two-Week Average	Current Day	Prior Day	30-Year Norm
Residential	3.6	3.6	3.7
Commercial	4.3	4.3	4.3
Power	33.5	33.7	27.5
Industrial	19.6	19.7	20.5
Total	61.1	61.3	55.9
Thomson Reuters Supply Estimates (bcfd):
	Current Day	Prior Day	Prior Year	High since 2011
U.S. Lower 48 dry production	72.3	72.6	74.3	75.2
Net U.S. imports from Canada	6.5	6.2	5.4	8.3
U.S. LNG imports	0.2	0.2	0.3	2.8
U.S. LNG exports	0.6	0.3		0.8
U.S. exports to Mexico	3.8	3.8	3.2	4.3
U.S. gas used due to nuclear outages	0.2	0.3
ICE U.S. Natural Gas Next-Day Prices ($ per mmBtu):
Hub	Current Day	Prior Day
Algonquin E-ALGCIT-IDX		2.90
Dominion South E-DOMSP-IDX		1.84
New York E-TSCO6NY-IDX		2.32
Henry Hub GT-HH-IDX		2.76
Chicago MC-CHICIT-IDX		2.70
SoCal Border W-SOBOR-IDX		2.92
ICE U.S. Power Next-Day Prices ($ per megawatt-hour):
Hub	Current Day	Prior Day
Ercot North SE-ERCONP-IDX		32.95
Mid C W-MIDCP-IDX		32.33
New England E-NEPLMHP-IDX		35.42
Palo Verde W-PVP-IDX		40.12
PJM West E-PJWHRTP-IX		33.26
SP-15 W-SP15-IDX		45.97

(Reporting by Scott DiSavino; Editing by Marguerita Choy)

(( scott.disavino@thomsonreuters.com ; +1 646 223-6072; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net ))

For Thomson Reuters Analytics, see: Open
For Thomson Reuters Interactive Map, type 'Interactive Map' in the box at upper left of the Reuters Eikon terminal.
    
For graphics on Baker Hughes rig counts, see:
http://graphics.thomsonreuters.com/15/rigcount/index.html
    
For next-day ICE U.S. gas prices, see: 0#GAS-IDX=ICE
    
For next-day ICE U.S. power prices, see: 0#POWER-IDX=ICE
For U.S. nuclear power outages, see: NUKE/ 
    
For U.S. Northwest hydro power report, see: NWRFC
    
For U.S. natural gas inventories vs five-year range, see: http://link.reuters.com/deh95w
For natural gas rig count vs futures price, see: http://link.reuters.com/nuz86t

Keywords: USA-NATGAS/NYMEX

nL1N19K0CK

©Thomson Reuters 2016. All rights reserved. The Thomson Reuters content received through this service is the intellectual property of Thomson Reuters or its third party suppliers. Republication or redistribution of content provided by Thomson Reuters is expressly prohibited without the prior written consent of Thomson Reuters, except where permitted by the terms of the relevant Thomson Reuters service agreement. Neither Thomson Reuters nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.