NEW YORK – Natural gas futures soared for the third straight day Wednesday as scorching temperatures baked states in the Northeast and the Midwest.
Crude and gasoline prices also rose sharply, after a goverment report showed that U.S. crude and gasoline inventories fell last week, and a tropical storm gained strength in the Caribbean.
Air conditioners in the United States have been putting pressure on national electricity grids and driving up the price of the natural gas that is the lifeblood of many power plants. Near-record high temperatures were predicted throughout the East, with temperatures topping 100 degrees as far north as Maine.
Natural gas rose 77 cents to $8.34 per thousand cubic feet in morning trading on the New York Mercantile Exchange. That contract had surged 14 percent on Monday to settle at $8.211, the highest close since early February.
"It's record temperatures throughout the country, and the power grid is under tremendous pressure," said Oppenheimer analyst Fadel Gheit.
Although this year's mild winter had left natural gas inventories at peak levels, "the high level of inventory is all temporary," said Gheit. "Once demand starts, it soaks up a lot of volume in a very, very short period of time."
Wednesday morning, the U.S. Department of Energy said that crude oil inventories fell by 1.8 million barrels in the last week of July to 333.7 million barrels — still 4 percent above levels a year ago.
Gasoline inventories slipped by 100,000 barrels to 210.9 million barrels, and are just about 1 percent above year-ago levels.
Distillate fuel inventories, meanwhile, rose by 700,000 barrels to 132.6 million barrels.
The Energy Department will release last week's natural gas inventory figures on Thursday. The previous week, the United States had 2.76 trillion cubic feet of natural gas in underground storage. The five-year average for this time of year is 2.27 trillion cubic feet.
Light sweet crude for September delivery rose $1.14 to $76.10 a barrel on the New York Mercantile Exchange in morning trading Wednesday.
Gasoline futures on the Nymex rose more than 4 cents to $2.3225 a gallon, while heating oil rose more than 4 cents to $2.1215 a gallon.
The average U.S. retail price of a gallon of regular unleaded gasoline was $3.001 on Wednesday, up from $2.926 a month ago, according to AAA.
Forecasters said Tropical Storm Chris could become the Atlantic's first full-fledged hurricane of the year by Wednesday evening, as the third named storm of the season brushed past islands in the eastern Caribbean early in the day. That raised traders' fears that it could strengthen and damage oil platforms and refineries along the Gulf Coast.
In the Middle East, there were no signs of a quick resolution to the escalating conflict between Israel and Hezbollah guerrillas in Lebanon.
Oil traders have been focused on the violence for nearly three weeks, worried about possible supply interruptions. Iran, OPEC's No. 2 supplier, is a backer of Hezbollah and is in the midst of a diplomatic standoff with the United Nations over its nuclear program.
On Tuesday, Iranian President Mahmoud Ahmadinejad rejected a U.N. Security Council resolution that would give his nation until Aug. 31 to suspend uranium enrichment.
"There are many issues that are supportive of strong prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "However, barring any change in the geopolitical situation or a hurricane, I expect prices to stay around the mid-70s for the near term."
On July 14, crude prices rose to a record $78.40 a barrel due to traders' concern that Iran could cut supplies if it gets involved in the fighting in Lebanon and Israel.