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Old June 10th, 2013, 12:59 PM
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Natural Gas Futures Gain as Hotter U.S. Weather Boosts Fuel Use

By Naureen S. Malik - Jun 10, 2013 10:25 AM ET
Natural gas futures rose a second day in New York amid an outlook for hotter weather that may spur demand from power plants.
Gas gained as much as 0.9 percent as above-normal temperatures may descend across most of the lower 48 dates through June 24, with lower readings in the Northeast, according to MDA Weather Services in Gaithersburg, Maryland. Prices dropped 3.9 percent last week as mild weather cut fuel use and a government report showed a larger-than-forecast supply increase.
“With the hotter temperatures coming in we are going to get cooling demand,” Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The bearish factor is the fact that the U.S. is a prolific producer of natural gas and demand hasn’t caught up to the supply side.”
Natural gas for July delivery increased 2.7 cents, or 0.7 percent, to $3.855 per million British thermal units at 10:13 a.m. on the New York Mercantile Exchange. Trading volume was 8.6 percent below the 100-day average for the time of day. The futures are up 15 percent this year.
The discount of July to October futures narrowed 0.2 cent to 3.6 cents from June 7.
July $3.80 puts were the most active options in electronic trading. They fell 1.5 cents to 6.5 cents per million Btu on volume of 504 at 10:15 a.m. The second-most-active options were August $4.30 calls, which dropped 0.1 cent to 0.6 cent on volume of 128. Puts accounted for 64 percent of trading volume. Implied volatility for at-the-money options expiring in July was 29.13 percent at 10 a.m., up from 27.51 percent on June 7.
Texas Heat

The high temperature in Houston on June 14 may be 96 degrees Fahrenheit (36 Celsius), 6 above normal, while New York’s reading may be 1 degree higher than average at 80, according to AccuWeather Inc. in State College, Pennsylvania.
Power plants, the largest U.S. consumer of natural gas, will account for 32 percent of demand in 2013, Energy Information Administration data show.
Gas stockpiles expanded by 111 billion cubic feet to 2.252 trillion in the week ended May 31, above the five-year gain of 92 billion for the period, the EIA, the Energy Department’s statistical arm, said last week.
U.S. inventories were 3 percent below the five-year average for the week, the smallest deficit to the average since March 29. A deficit to year-earlier levels narrowed for the eighth straight week, reaching 21.5 percent from 23.7 percent.
Gas supplies may climb to 3.78 trillion cubic feet by Nov. 1 as production continues to grow while higher gas prices prompt some electricity generators to use coal instead, Bill Herbert, an analyst with Simmons & Co., said in a note to client today.
The EIA estimates that U.S. marketed gas production in 2013 will set a record for the sixth straight year, climbing 1 percent to 69.9 billion cubic feet a day, according to its May 7Short-Term Energy Outlook.
To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net;
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
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