US natural gas futures jumped nearly 4 percent on Monday as hotter weather forecasts led to a change in market direction, with players betting higher-than-normal temperature in the next two weeks will prompt utilities to burn more gas to feed power demand for cooling. New York Mercantile Exchange's front-month gas contract, September, had its largest one-day advance in three weeks as it rose 9.5 cents, or 3.7 percent, to settle at $2.679 per million British thermal units.
The contract slumped more than 3 percent on Friday as forecasts then showed moderating summer weather. September futures rallied over a five-day period prior to that on expectations that high temperatures will lead to more gas usage to power air conditioning.
Gaithersburg, Maryland-based MDA Weather Services said in a note the past weekend was warmer than earlier days in the week and its six-to-10 forecast showed "above normal temperatures expected to be more widespread and steady across the eastern half" of the United States. "The latent heat will keep injections in check and will also attract more hurricanes to the Eastern seaboard," said Kent Bayazitoglu, director of market analytics at energy consulting firm Gelber & Associates in Houston. After a hot start to the summer, analysts said a warm end to the season would push generators to burn even more gas to keep air conditioners humming, while an active hurricane season could reduce some production in the Gulf of Mexico region.
"A major event into the Gulf of Mexico could force enough short covering to push values above minor chart resistance levels," said Jim Ritterbusch of Chicago-based energy markets consultancy Ritterbusch and Associates. US natural gas prices at the Henry Hub benchmark in Louisiana were expected to average about $2.38 per million British thermal units (mmBtu) in 2016 and $3.09 in 2017, according to analysts. That compares with an average of $2.61 per mmBtu in 2015, the lowest level since 1999.