Natural gas gains on warmer weather forecasts

Natural gas rose on Monday, extending last weeks gains as weather forecasting models pointed at above-normal temperatures in parts of the U.S., boosting demand for the fuel.

On the New York Mercantile Exchange, natural gas for August delivery traded at $3.677 per million British thermal units at 8:56 GMT, up 0.91% on the day. Prices held in range between days high at $3.682 per mBtu that was hit during European trading and low of $3.655. Natural gas settled almost 1% higher on Friday amid warmer weather forecasts, marking a 0.73% weekly advance.

According to WSI Corp. in Andover, Massachusetts, temperatures will be above normal in the Northeast and Great lakes region between July 17 and July 21. AccuWweather Inc. said temperatures in New York on July 17 may be 93 degrees Fahrenheit, 9 higher than usual.

When above-normal temperatures are expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of the U.S. electricity generation. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.

Last Thursday, the EIA said in its weekly report that natural gas stockpiles gained 82 billion cubic feet in the week ending July 5, generally in line with expectations. The Natural Gas Storage indicator stood at 2 687 billion cubic feet, 14.2% below last year’s 3 130 billion cubic feet during the comparable week. This was also 0.8% lower than the five-year average reading of 2 709 billion cubic feet.

Elsewhere on the market, oil erased earlier daily gains. WTI crude for September delivery traded at $105.04 per barrel at 8:56 GMT, down 0.48% on the day. Prices held in range between high and low of $105.92 and $104.95 respectively. Meanwhile, Brent crude also plunged, standing at $107.67 a barrel, down 0.25% on the day. The European benchmark varied between daily high and low of $108.26 and $107.58 a barrel.