The price of natural gas futures soared on Tuesday as record high temperatures, as high as 103 degrees Fahrenheit, blasted the Northeastern United States. In addition, the beginning of hurricane season in the Gulf of Mexico raised concerns about natural gas supply.
This June was the fourth-hottest on record, according to the National Weather Service, and peak temperatures are expected to hit highs above 100 degrees through the rest of the week.
Natural gas futures rise during heat waves because traders anticipate higher usage as power companies use gas-fired plants to meet the extra demand for electricity to run millions of air-conditioning units.
Gas plants are the most common form of “peak” power generation, because they can be turned on and off relatively quickly, compared to other types of power plants like oil or coal.
Natural gas futures for August delivery rose by 18.1 cents on Tuesday, hitting $4.868 per million British thermal units.
However, on Wednesday, natural gas prices fell slightly, falling about 4 cents.
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