Natural Gas Futures Climb On Outlook For Late August Heat
by Naureen S. Malik
Natural gas futures gained for a second day in New York on speculation that a wave of eastern U.S. heat this week will spur fuel demand before turning cooler.
Gas rose 0.6 percent as forecasts showed unusually hot weather will linger across the lower 48 states over the next five days, according to MDA Weather Services in Gaithersburg, Maryland. September options expired today.
“We do still have some pretty strong cooling demand in the Midwest today and in the coming days, so that is probably a positive factor in the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We will continue to flip around the $3.50 level. You saw a little bit of options expiration squaring giving the market a bit of a boost.”
Natural gas for September delivery increased 2.1 cents to settle at $3.534 per million British thermal units on the New York Mercantile Exchange. Trading volume was 22 percent below the 100-day average at 2:51 p.m. Gas Futures have climbed 5.5 percent this year.
The discount of September to October futures narrowed 0.1 cent to 3.9 cents. October gas traded 36.3 cents below the January contract, compared with 36.7 cents yesterday.
October $3 puts were the most active options in electronic trading. They were unchanged at 0.5 cent per million Btu on volume of 1,374 at 3:17 p.m. Puts accounted for 47 percent of trading volume. Implied volatility for October at-the-money options was 31.77 percent at 3:15 p.m., compared with 31.82 percent yesterday.
Entergy Corp. (ETR) said today it plans to close its 41-year-old Vermont Yankee nuclear plant in the fourth quarter of 2014 partly because a “transformational shift” in gas from shale deposits has resulted in sustained low gas and wholesale power prices. The company also cited “artificially low” power prices and high costs associated for running the single unit.
The plant, about 5 miles south of Brattleboro, Vermont, has a summer capacity of 604 megawatts and accounted for 4.1 percent of New England’s power output in 2012, U.S. Energy Information Administration data show.
If efficient combined-cycle gas plants made up for the loss of Vermont Yankee, regional demand for the fossil fuel might increase by almost 100 million cubic feet a day, or 10 percent, said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. New England power plants consumed about 1 billion cubic feet a day of gas last year, she said.
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