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Natural gas prices soar with demand for electricity
Updated 8/1/2006 10:14 s
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Natural gas prices jumped to their highest in nearly six months Monday as hot weather across much of the USA led to increased demand for natural-gas-generated electricity.
Natural gas trading for future delivery rose $1.027, or 14%, to $8.211 per thousand cubic feet as investors fretted about natural gas supplies. That was the biggest increase since December and the highest close since Feb. 3.
The increase came as hot weather spread across the USA, leading to elevated demand for electricity. Pepco, which provides electricity to 745,000 customers in Washington, D.C., and Maryland, warned demand could hit records this week in the area, where temperatures were in the mid-90s Monday.
Natural gas is a key source of electricity generation. When demand for air conditioning, and thus electricity, rises, natural gas supplies can decline if they are not replenished. This week's heat wave came after the Energy Department last week reported an unexpected decline in natural gas inventories.
"You put the two together, you've created this panic about the natural gas market," Alaron Trading analyst Phil Flynn says.
The increase in natural gas prices was accompanied by gains in oil prices. Oil and natural gas are sometimes interchangeable by power-generating facilities, so changes in the price of one can sometimes affect the other.
The price of a barrel of crude oil trading in New York rose $1.16, or 1.6%, to $74.40.
Gasoline prices also stayed above $3 a gallon. The average U.S. price for a gallon of regular gasoline was $3.004 Monday, up a fraction of a cent from a week ago and 71 cents from a year ago, according to the Energy Department. In a separate survey, AAA said the average gasoline price was $3.005 Monday.
The natural gas price gain follows a period of steep declines. A milder-than-normal winter meant less natural gas use early in 2006, leading to a buildup of supplies. Government officials were predicting a decline in natural gas prices during the winter from a year ago, when prices reached records. The majority of U.S. homes are heated with natural gas.
"While customers may have to pay more for natural gas next winter than we thought a month ago, they still will be paying less than last winter's record prices," WTRG Economics economist Jim Williams says.
Williams, like other energy analysts, however, warned that if hurricanes were to damage natural gas production facilities and pipelines this summer, the outlook for natural gas prices could change quickly
Updated 8/1/2006 10:14 s
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Natural gas prices jumped to their highest in nearly six months Monday as hot weather across much of the USA led to increased demand for natural-gas-generated electricity.
Natural gas trading for future delivery rose $1.027, or 14%, to $8.211 per thousand cubic feet as investors fretted about natural gas supplies. That was the biggest increase since December and the highest close since Feb. 3.
The increase came as hot weather spread across the USA, leading to elevated demand for electricity. Pepco, which provides electricity to 745,000 customers in Washington, D.C., and Maryland, warned demand could hit records this week in the area, where temperatures were in the mid-90s Monday.
Natural gas is a key source of electricity generation. When demand for air conditioning, and thus electricity, rises, natural gas supplies can decline if they are not replenished. This week's heat wave came after the Energy Department last week reported an unexpected decline in natural gas inventories.
"You put the two together, you've created this panic about the natural gas market," Alaron Trading analyst Phil Flynn says.
The increase in natural gas prices was accompanied by gains in oil prices. Oil and natural gas are sometimes interchangeable by power-generating facilities, so changes in the price of one can sometimes affect the other.
The price of a barrel of crude oil trading in New York rose $1.16, or 1.6%, to $74.40.
Gasoline prices also stayed above $3 a gallon. The average U.S. price for a gallon of regular gasoline was $3.004 Monday, up a fraction of a cent from a week ago and 71 cents from a year ago, according to the Energy Department. In a separate survey, AAA said the average gasoline price was $3.005 Monday.
The natural gas price gain follows a period of steep declines. A milder-than-normal winter meant less natural gas use early in 2006, leading to a buildup of supplies. Government officials were predicting a decline in natural gas prices during the winter from a year ago, when prices reached records. The majority of U.S. homes are heated with natural gas.
"While customers may have to pay more for natural gas next winter than we thought a month ago, they still will be paying less than last winter's record prices," WTRG Economics economist Jim Williams says.
Williams, like other energy analysts, however, warned that if hurricanes were to damage natural gas production facilities and pipelines this summer, the outlook for natural gas prices could change quickly
Oh and this quote
Oil and natural gas are sometimes interchangeable by power-generating facilities, so changes in the price of one can sometimes affect the other.
But don't despair . . if the winter is mild, we'll see these prices plummet back again. But a cold winter and home heating could get quite pricy
okay, two words.
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