Friday, July 23, 2010

Bad Gulf Weather Means Higher Natural Gas Price


Natural gas futures jumped to a two- week high after the National Hurricane Center said a tropical depression may intensify, threatening gas and oil production in the Gulf of Mexico.
Tropical storm warnings have been posted in the Bahamas and South Florida. Gas supplies rose 51 billion cubic feet last week, below the five-year average gain of 64 billion, an Energy Department report today showed. Analysts surveyed by Bloomberg expected an increase of 50 billion, and a separate survey of Bloomberg users showed an increase of 51 billion.
“People are watching that storm like a hawk,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It’s keeping a little bit of a fear premium in gas right now.”
Natural gas for August delivery rose 10.5 cents, or 2.3 percent, to $4.618 per million British thermal units at 1:22 p.m. on the New York Mercantile Exchange. Prices touched $4.719, the highest level since July 7.
The stockpile total of 2.891 trillion cubic feet was 9.9 percent higher than the five-year average, narrower than a 10.7 percent gap the previous week, department data showed. The deficit to year-earlier supplies widened to 1.8 percent from 1.1 percent.
A tropical depression has formed in the Atlantic about 405 miles (652 kilometers) east-southeast of Key Largo, Florida, according to a statement released by the National Hurricane Center at 11 a.m. in Miami.
Storm Forecast
The depression, with maximum sustained winds of 35 miles per hour (56 kph), may become a tropical storm later today, the center said. The next Atlantic storm will be named Bonnie.
This hurricane season, estimated by the government to be the most active since 2005, may cut gas production in the Gulf of Mexico by 166 billion cubic feet through November, according to Energy Department estimates released on July 7.
Hurricane Alex, the earliest Atlantic hurricane since 1995, cut off as much as 919 million cubic feet of daily production last month in the Gulf of Mexico, about 15 percent of regional output, before it came ashore in Mexico.
“We’re less dependent on the Gulf of Mexico production” than we used to be, said Phil Flynn, vice president of research at PFGBest in Chicago. “But, obviously, if you’re going take 11 percent of domestic production offline, we could start to see that pad we have start to dwindle.”
Temperatures in the U.S. East Coast and Midwest will be above normal from July 27 to July 31, according to the National Weather Service.
New York will have a high of 95 degrees Fahrenheit (35 Celsius) on July 24, 10 degrees above average, according to AccuWeather Inc. Chicago’s temperature is forecast to hit 91.
About 23 percent of electricity is generated using natural gas, according to the Energy Department.
Hotter Weather
Cooling requirements in the U.S. will be 24 percent higher than normal from tomorrow through July 29, according to Weather Derivatives of Belton, Missouri.
“Given the recent extraordinarily hot weather, you’re getting injections that are quite small,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The market implication is, could this persist for a number of weeks and affect overall storage level going into the fall?”
Stockpiles may rise to 3.81 trillion cubic feet by the end of October, close to a record 3.837 trillion last November, the Energy Department’s Short-Term Energy Outlook on July 7 showed.
To contact the reporters on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;Noah Buhayar in New York at buhayar@bloomberg.net

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