03 June 2014, News Wires – Natural gas prices got a boost Monday with a weather threat hovering over the Gulf of Mexico and new rules for power plants announced from Washington.
Prices for the front-month July contract settled up 7 cents, or 1.5%, to $4.612 per thousand cubic feet on the New York Mercantile Exchange, Dow Jones reported.
The closing price is within a penny of the highest closing price since 7 May, the news wire said.
Few market observers could agree on what started the rally. Hot near-term weather that could boost demand for natural gas to fuel air conditioners was balanced out by cooler-than-expected temperatures now forecast for about two weeks out.
Some pointed to a low-pressure system hovering over the Gulf of Mexico. A Colorado State University team that tracks tropical weather added one hurricane Monday to its Atlantic forecast for 2014.
“Supplies from natural gas are so far behind the average that any disruption in supply – even a very small one – can have a big impact,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago, according to Dow Jones.
Natural gas stockpiles are still about 40% off their typical average for this time of year because a frigid winter drained supplies. The biggest jolts to the market this spring have all related to producers ability to outpace growing demand and refill those stockpiles for the winter. A hurricane may disrupt some of that and a hotter summer may boost demand for electricity and the gas that fuels it, analysts have said.
Natural gas is also likely to be one of the biggest winners from new rules coming out of Washington this week. The Environmental Protection Agency proposed mandating power plants cut US carbon-dioxide emissions 30% by 2030 from levels of 25 years earlier. Its biggest impact is expected to be in cutting the demand for coal, natural gas’s primary competitor as a fuel for power plants.
While that does help boost demand for gas in the years to come, analysts warned that there are a lot of unknowns and the changes are many years away.
“Until we have an idea of what the real enforcement plan will actually be and how this will unfold, it’s hard for it to have an impact on the market,” Teri Viswanath, a natural-gas strategist at BNP Paribas, told Dow Jones.