US natural gas futures remained under downward pressure in midday trade on Tuesday as traders weighed shifting weather forecasts, above-average storage and the approaching expiration of the September contract, amid ample supplies.
The front-month Henry Hub contract fell by 0.54% to $2.767 per million British thermal units, while the continuous contract lost 0.32% to trade at $2.826/MMBtu.
While near-term weather forecasts have shifted toward hotter conditions, the market looked toward lower demand expected in the approaching shoulder season.
Above-average temperatures are expected across the Gulf, Midwest and Mid-Atlantic from Aug. 30 through Sep. 8, Bloomberg said, citing Commodity Weather Group, which supports continued immediate gas-fired cooling demand.
Market positioning around the September contract is also contributing to price volatility. With the front-month contract approaching expiration and traders rolling positions into October, market participants are squaring positions and shifting exposure, potentially amplifying price moves and adding downward pressure, Natural Gas Intelligence said Tuesday.
Above-average storage levels are another bearish factor. US underground inventories remain roughly 5% to 6% above the five-year average, while solid injections through late summer have eased concerns about supply ahead of the winter heating season.
Current storage trends suggest inventories could approach 4 trillion cubic feet before winter.
Production remains robust despite some recent fluctuations. Bloomberg pegged Lower-48 dry gas production at 110.9 billion cubic feet per day on Tuesday, up 1.4% from the same period last year.
Gelber & Associates said production was running at its weakest level in two weeks, while Canadian imports stood at 4.6 Bcf/d, putting total supply at 115.6 Bcf/d.
That compares with modeled demand of 116 Bcf/d, narrowing some of the supply surplus that had built earlier in August.
The tighter balance, however, has not yet been viewed as a durable supply concern, with the market treating the production decline as a temporary interruption rather than the start of a sustained shortage, Gelber & Associates said.
On the export side, Bloomberg put US LNG feedgas flows at 17.4 Bcf/d. Flows remained below capacity as Golden Pass continued its slow production ramp-up and maintenance at Cheniere Energy's (LNG) Corpus Christi plant, while Freeport LNG reduced feedgas demand.
Price: $278.94, Change: $-1.86, Percent Change: -0.66%