US GAS: Futures End Higher On Hot Weather, Hurricane Outlook

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NEW YORK (Dow Jones)--Natural-gas futures ended higher Wednesday, driven by hot weather and predictions of an unusually active hurricane season.

Natural gas for July delivery on the New York Mercantile Exchange closed 17.5 cents higher, or 4.12%, at $4.423 a million British thermal units after reaching a high of $4.44/MMBtu earlier in the day.

"Traders are looking at the hurricane season and the expectations of heat, but we still have, overall, very adequate inventory levels," said Kyle Cooper, an analyst with IAF Advisors, a Houston-based energy advisory firm.

Forecasts of warmer-than-normal temperatures in the major gas-consuming regions were buoying gas prices Wednesday. The balmy weather is expected to produce substantial demand for natural gas to generate electricity for cooling.

MDA EarthSat, a Rockville, Md., private weather forecaster, is expecting above-normal temperatures in the Southeast, South Central region and parts of the West from June 7 to June 11. From June 12 to June 16, MDA is predicting warmer-than-normal temperatures across most of the eastern two-thirds of the U.S.

Traders were also eyeing meteorologists' forecasts of an intense hurricane season in the Atlantic Ocean. The 2010 Atlantic hurricane season will be extremely active, featuring five intense hurricanes--twice the 50-year average--forecasters at Colorado State University said Wednesday. Storm disruptions to gas infrastructure in the Gulf of Mexico could cause prices for the fuel to spike higher.

Gas supplies remain ample despite predictions of a relatively modest build in U.S. gas inventories, however. The U.S. Energy Information Administration is expected to report that 93 billion cubic feet of gas were added to storage during the week ended May 28, according to the average prediction of 24 analysts and traders in a Dow Jones Newswires survey.

The EIA is scheduled to release its storage data Thursday at 10:30 ET.

The storage estimate falls short of last year's 121 bcf build in storage for the same week and the five-year average build for that week, which was 100 bcf. If the estimate is correct, inventories as of May 28 will total 2.362 trillion cubic feet, about 15% above the five-year average and 1.9% above last year's level for the same week.

Unusually warm weather in the central and eastern U.S. last week sparked significant demand for natural gas for cooling, leading to a modest injection into storage, analysts and traders predicted. But gas production levels remain high.

"The bullish bet in natural gas remains a bet on weather...as we continue to see evidence of rising U.S. production on relatively aggressive drilling programs from producers," wrote Tim Evans, an energy analyst with Citi Futures Perspective in New York, in a note to clients.


-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com


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