NG Price drifting higher

[dan_s]

It seems to be lost on this market that higher NG prices are going to offset the lower oil prices for most E&P companies. 2nd quarter results look to be quite good for the E&P companies in the S-16. MIND and PDS will report lower Q2 results but that is just their normal season dip. - Dan

June 7 (Bloomberg) -- Natural gas futures rose to the highest price in more than 15 weeks as forecasts showed hotter- than-normal weather across much of the U.S. next week, boosting demand for the power-plant fuel.

High temperatures will stretch from the Southwest to New England June 12 through June 21, according to MDA Federal Inc.’s EarthSat Energy Weather. The number of U.S. oil and gas rigs operating in the Gulf of Mexico dropped by half last week to a 16-year low, according to Baker Hughes Inc.

“Hot weather will boost cooling demand,” said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. “The government started to curtail offshore drilling and natural gas can definitely benefit from that.”

Natural gas for July delivery rose 11.9 cents, or 2.5 percent, to $4.916 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Feb. 19. Gas has risen 13 percent this month and is up 27 percent from a year ago.

New York will have a high of 90 degrees Fahrenheit (32 Celsius) on June 13, according to EarthSat, based in Rockville, Maryland. The city’s average temperature will be 10 degrees above normal on that day. Chicago will have a high of 86 degrees.

Cooling requirements in the U.S. will be 17 percent higher than normal from tomorrow through June 14, according to Weather Derivatives of Belton, Missouri.

About 21 percent of electricity is generated using natural gas, according to the Energy Department.

Cooling demand

“The biggest marginal driver of prices in this market is heat,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Also, any dropoff in drilling is going to impact on gas supply and prices.”

The halt in deep-water drilling in the wake of the BP Plc oil spill took the Gulf rig count to 23 last week, the lowest level since August 1993, from 46 a week earlier. About 11 percent of U.S. gas is pumped on federal leases in the Gulf.

Natural-gas rigs dropped by 20 to 947, according to Baker Hughes.

U.S. gas inventory levels rose 88 billion cubic feet to 2.357 trillion in the week ended May 28, the Energy Department said last week. The figure was smaller than the five-year average increase of 100 billion cubic feet and below the 124 billion added to storage a year earlier.

LNG Cargoes

Two tankers carrying liquefied natural gas are scheduled to arrive in the U.S., vessel tracking data compiled by Bloomberg showed today.

El Paso Corp.’s Elba Island terminal near Savannah, Georgia, is expected to receive the Methane Princess today. The ship can carry 136,086 cubic meters of LNG, or 2.93 billion cubic feet when converted to a gas.

Southern Union Co.’s Trunkline LNG terminal will receive the Neva River, which can move 145,394 cubic meters of LNG, or 3.13 billion cubic feet of natural gas, on June 12.

U.S. LNG imports will rise 35 percent this year, according to the Energy Department’s Short-Term Energy Outlook last month. This month’s report is scheduled for release tomorrow.

Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 6.34 cents, or 1.4 percent, to $4.666 per million Btu, the highest price since March 4, according to data compiled by Bloomberg.

Gas futures volume in electronic trading on the Nymex was 291,117 as of 2:48 p.m., compared with a three-month average total of 245,000. Volume was 372,492 June 4. Open interest was 819,843 contracts, compared with the three-month average of 852,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net

Last Updated: June 7, 2010 15:13 EDT