Natural gas rises with hot weather

Natural gas buoyed to four-month highs this week, rallying 15 percent over the last two weeks alone.

A recent heat wave across the east coast and the south increased demand for air conditioning and electricity sharply. Nearly a quarter of U.S. electricity is generated by burning natural gas, and the recent surge in power need has helped to cut into U.S. natural gas supplies.

As recently as last fall, the U.S. was swamped with record natural gas inventories, but heating demand over the winter, increased exports and this recent heat wave have brought inventories back to normal levels.

The U.S. natural gas market depends largely on domestic factors, as the U.S. imports less than 10 percent of its natural gas from foreign nations. Yet, many natural gas traders are watching global factors, especially the move away from nuclear power generation. As nations like Germany and Japan seek cleaner, safer energy sources, some analysts expect them to use an increasing amount of natural gas.

In the United States, political moves away from crude oil and nuclear power could support the natural gas market, but the transition could take years, if not decades. In the meantime, coal remains the largest source for electricity generation, both in the United States and around the world.

As of midday Friday, natural gas for July delivery was trading near $4.75 per million British Thermal Units.

Economic outlook muddied

The markets were roiled this week by a slew of negative economic reports, forcing investors to reassess optimistic views on the U.S. economy. U.S. Department of Labor reports showed increasing unemployment and a lack of new job creation, while manufacturing and housing data showed slower economic growth and a weak housing sector.

As traders watched the data come out, they sold stocks and crude oil, while buying gold and bonds. This action pushed the stock market 3.5 percent lower while crude oil slipped 1 percent. As these markets fell, the so-called "flight-to-quality" assets, gold and U.S. Treasury bonds, both rallied. As of midday Friday, crude oil for July delivery was trading at $100 per barrel, while August gold was near $1545 per ounce.

Opinions are solely the writer's. Alex Breitinger is commodities broker with Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso, IN. He can be reached at (800) 411-3888 or indianafutures.com. This is not a solicitation of any order to buy or sell any market.