Nationwide, power plants will burn 8.3 percent more gas next week as hotter readings in the South make up for mild weather in the Midwest and Northeast, according to data from Bloomberg New Energy Finance. Houston is set to reach a high of 96 degrees Fahrenheit (36 Celsius) on June 23, the most since September, surpassing Manhattan’s peak this week of 94, AccuWeather Inc.’s website showed.
With gas futures back below $3 per million British thermal units, the market is especially sensitive to changes in weather forecasts in the run-up to the peak cooling season. Without a scorching summer that spurs homeowners and businesses to crank up their air conditioners, a persistent supply overhang is unlikely to be shifted anytime soon.
“The current 15-day forecast shows further heat blanketing most of the southern states,” said Het Shah, an analyst with BNEF in New York. “The power burns in these areas are expected to pick up substantially,” he said, referring to demand from electricity generators.
Southern states stretching along the Gulf Coast and further west to California make up more than half of demand for the power-plant fuel during summer. Consumption has increased especially in the Southeast as new plants come online to take advantage of cheap shale gas.
Gas demand from power plants is set to climb to 229 billion cubic feet in the week ending June 23, according BNEF data. That follows an expected 15 percent gain this week.
There’s a good chance that cooler than usual temperatures will linger next week from the Great Lakes to the Northeast, including New York and Chicago, the U.S. Climate Prediction Center said. At the same time, both the West and Southeast from North Carolina to Florida are forecast to bake under warmer than normal readings.
“We are going to be moving toward the hottest months of the year, July and August, and demand should start picking up,” Shah said. “Going forward the gas market is going to react to how intense the heat will be compared to the previous summers. It’s all relative.”