Texas Natural Gas Prices Rally to Three-Month High Amid Heat Wave

(Bloomberg) -- Texas spot prices for natural gas strengthened as temperatures above 100F (38C) boosted demand for electricity to run air conditioners across the second most-populous US state. 

At the Katy gas hub near Houston, prices rose almost 11% on Tuesday to the highest settlement since March 6. Meanwhile, the Waha hub in the Permian Basin saw the biggest day-on-day jump since mid-May, closing higher by 27% from the previous trading session on Friday. 

Gas is the primary source of fuel for Texas power generators, followed by solar, coal and wind, according to grid manager the Electric Reliability Council of Texas, known as Ercot.

“Production has been down a little the last few days due to processing plant outages,” said Jason Ferguson, an analyst with research firm RBN Energy LLC. The spread between Lone Star State spot prices and benchmark New York Mercantile Exchange futures have been robust, he noted. 

According to Ercot, gas accounted for 49% of Texas’s power generation as of 10:19 Central, more than double any other fuel type. The heat wave baking the state shows no signs of abating for at least another week. 

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