Natural gas futures extended Thursday's losses on Friday, falling to a 1.5-month low as forecasts for cooler US weather reduced cooling demand expectations, while ample domestic supplies added to the bearish sentiment.
The front-month Henry Hub contract and the continuous contract both dropped by 2.12% to $2.948 per million British thermal units.
Updated weather models showed cooler temperatures across key demand regions over the next two weeks, prompting traders to lower expectations for near-term cooling demand, Gelber & Associates said.
It noted that the latest forecast removed meaningful heat from the 6-15-day outlook, particularly across the central and eastern US, although it said a brief mid-July warm spell remains intact.
Total Lower-48 demand slipped 0.4 Bcf/d day over day to 77.7 Bcf/d, although it remained 0.6% above year-ago levels, Barchart said, citing BNEF data. According to Celsius Energy, US power burn totaled 44.7 Bcf/d on July 9, up 0.9 Bcf/d from the previous day but 3.8 Bcf/d below the same day last year.
Less demand is expected from the export sector as Freeport LNG started maintenance work on its pre-treatment and liquefaction facilities. Work is expected to continue until late August. Daily LNG feedgas demand weakened on Friday. Net deliveries to US LNG export terminals fell by 0.8 Bcf/d to 18.2 Bcf/d on Friday, down 5.2% from a week earlier.
Supply fundamentals also remained bearish. The US Energy Information Administration reported Thursday that working natural gas inventories stood 6.6% above the five-year average as of July 3.
While daily US output and import levels have fallen, supplies are considered abundant. Lower-48 dry gas production was estimated at 112.6 Bcf/d on Friday, down 0.9 Bcf/d from the previous day but up 5.2% from a year earlier. EIA on Tuesday raised its forecast for 2026 US dry natural gas production to 111.2 Bcf/d from its June estimate of 111.0 Bcf/d.
Gelber & Associates said Friday's supply-demand balance remained loose, and calculated total supply at 115.8 Bcf/d versus demand of 112.0 Bcf/d, leaving the market oversupplied by 3.8 Bcf/d.
"Modest supply slippage provides some support," Gelber said. "However, it is unlikely to outweigh the immediate loss of export demand and the cooler extended forecast until stronger summer power burn returns."