Natural gas futures pushed to two-week highs on bargain buying, continued heat in some power markets and concern over a Caribbean storm that could strengthen as it churns into the Gulf of Mexico.
Natural gas for October delivery settled 14.5 cents, or 3.71%, higher, at $4.054 a million British thermal units on the New York Mercantile Exchange.
In the last two sessions the benchmark contract has risen 5.8% from the six-month low of $3.78/MMBtu reached Tuesday.
"Whenever gas gets to $3.80, $3.75, it finds support," said Stephen Schork, president of the Schork Group in Vilanova, Pa. "This market has been supported there all year."
Schork down-played the potential market impact of a storm that is moving from the northwest Caribbean into the southern Gulf of Mexico.
The storm -- which the National Hurricane Center said has a 30% chance of developing into a tropical cyclone in the next 48 hours and would be called Lee if it does -- could certainly disrupt oil and gas production in the northern Gulf. But Schork said the Gulf's importance in the supply-demand equation is waning as a growing portion of the nation's gas supply comes from onshore basins, particularly shale formations.
The Energy Information Administration on Tuesday said that while daily natural gas production in the lower 48 states rose in June to a new shale-era high of 69.47 billion cubic feet, Gulf output declined for the sixth straight month to 5.07 bcf per day.
Nonetheless, traders are "pricing in" the weather system, said Pax Saunders, an analyst with Gelber & Associates in Houston.
The National Hurricane Center said that although "upper-level winds are not favorable for significant development," there is "some potential" for the storm to develop into a tropical cyclone over the central or western Gulf."
Meanwhile, private forecaster Commodity Weather Group predicts a "short-term" surge into the 90s for much of the Midwest, with temperatures in St Louis topping 100, and the hottest weather of the summer along the West Coast, which could lift demand for gas-fueled power for air conditioning.
Above-average temperatures have helped counteract soaring U.S. production and limit storage injections this summer.
Analysts and traders polled in a Dow Jones Newswires survey Wednesday expect the EIA to report Thursday that 62 bcf of natural gas was added to U.S. stockpiles the week ended Sept. 19. Such a build is largely in-line with the 60 bcf five-year average for the week, though greater than last year's 52 bcf injection.
The EIA is scheduled to release its storage data at 10:30 a.m. EDT.