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Natural gas jumps as hot weather boosts demand

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[July 16, 2010]  (AP) -- Natural gas prices jumped Thursday as Americans cranked up air conditioners with hot weather gripping much of the country.

Natural gas rose 28 cents, or 6.5 percent, to settle at $4.586 per 1,000 cubic feet on the New York Mercantile Exchange. That's the highest settlement price for natural gas in two weeks.

Meanwhile at the gasoline pump, motorists across the country paid an average $2.718 for a gallon of regular unleaded, up 0.5 cent from Wednesday, according to AAA, Wright Express and Oil Price Information Service. That's about the same as a week ago and nearly 22 cents higher than a year ago.

The increase in natural gas prices came after the Energy Department's Energy Information Administration reported natural gas inventories held in underground storage in the lower 48 states increased by 78 billion cubic feet to 2.840 trillion cubic feet for the week ended July 9.

That was about 1.1 percent less than a year ago but 10.7 percent more than the five-year average of 2.566 trillion cubic feet.

Record heat in parts of the country increased electricity production by 8.7 percent this week from the same time a year ago, according to the Edison Electric Institute. In the past 52 weeks, electricity generation has risen just 0.3 percent from a year ago.

Some power plants use natural gas to run generators that produce electricity.

Natural gas prices have remained low because overall demand has been weak while stockpiles have risen amid consumer worries about high unemployment and the economic recovery.

Yet, analysts don't think lower prices necessarily will translate into lower heating costs this winter, noting that natural gas was even cheaper a year ago.

"I wouldn't expect utilities to start lowering natural gas prices," oil analyst and trader Stephen Schork said. "The economy from a jobs perspective, from a housing perspective, certainly hasn't rebounded but the industrial demand has rebounded so you do have greater demand."

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Lind-Waldock senior market strategist Rich Ilczyszyn believes winter will bring higher prices for both consumers and traders as demand rises.

A forecast active hurricane season has yet to begin. If big storms do come, they could disrupt production in the Gulf of Mexico. Although onshore production would offset any hurricane-related delays, a disruption still would prompt many traders to take action, he said, and prices could rise.

Oil prices retreated on disappointing economic news. The Federal Reserve said industrial production inched up 0.1 percent last month, while regional index from New York and Philadelphia showed declines.

Benchmark crude lost 42 cents to settle at $76.62 a barrel.

In other Nymex trading heating oil fell 1.78 cents to settle at $2.0183 a gallon, and gasoline lost 0.58 cent to settle at $2.0347 a gallon.

Brent crude fell 58 cents to settle at $76.19 a barrel on the ICE futures exchange.

[Associated Press; By SANDY SHORE]

Associated Press writers Natalie Ragus in London and Alex Kennedy in Singapore contributed to this report.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.



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