Natural gas advanced to an 11-week high on speculation that demand for the power-plant fuel will rise.
Plants will burn 13 percent more gas this year to average a record 25.21 billion cubic feet a day, according to data from an Energy Information Administration report Tuesday. The government raised its estimate from 24.9 billion in last month’s outlook.
“At these levels it absolutely makes sense that consumption will be strong this summer,” Stephen Schork, president of Schork Group Inc., a consulting firm in Villanova, Pennsylvania, said by phone Wednesday. “Basically, there’s no reason to burn coal at these prices.”
Natural gas for June delivery gained 3.8 cents, or 1.3 percent, to settle at $2.935 per million British thermal units on the New York Mercantile Exchange, the highest since Feb. 20. Volume for all futures traded was 28 percent above the 100-day average at 2:44 p.m.
Power prices rebounded 18 percent from the 34-month low of $2.49 reached April 27 as money managers exited some of their bearish bets, Tim Evans, an energy analyst at Citi Futures in New York, said in a note to clients.
“While the storage data looks bearish, the market continues to draw support from short-covering to correct what had been a significant oversold condition,” Evans said.
Speculators’ net-short positions in four benchmark gas contracts fell 43 percent to 72,225 futures equivalents in the week ended May 5, Commodity Futures Trading Commission data show.
Gas-fired plants will account for 30.7 percent of U.S. power generation in 2015, up from 30.4 percent forecast last month, the EIA said.
Temperatures will be above normal on the East Coast through May 27, according to MDA Weather Services in Gaithersburg, Maryland. The high in New York on May 27 may be 83 degrees Fahrenheit (28 Celsius), 9 more than average, AccuWeather Inc. said on its website.
Government data scheduled for release Thursday may show gas inventories rose by 117 billion cubic feet last week, based on the median of 13 analyst estimates compiled by Bloomberg. That’s compared with the five-year average change of 82 billion for the period and a gain of 101 billion in the same week last year.