US natural gas futures continued to decline from earlier highs but managed to remain in positive territory in after-hours trade on Monday, despite forecasts for hotter weather across much of the country that point to stronger demand.
The front-month Henry Hub contract and the continuous contract rose by 0.15% to $3.238 per million British thermal units.
Barchart said natural gas prices rallied to a three-week high in the nearest futures contract on Monday as weather forecasts signaled increased cooling demand. It cited the Commodity Weather Group on Monday, which said above-average temperatures are expected across most of the US from July 2-6.
Forecasts also indicate Lower 48 population-weighted temperatures are expected to rise above the 10-year seasonal average during the first week of July after generally below-average temperatures prevailed through much of June, Aegis Hedging said Monday.
Warmer summer weather typically increases electricity demand for air conditioning, boosting natural gas consumption by power generators.
On the supply side, US dry gas production remained steady at a robust 109.5 billion cubic feet per day, Aegis said, citing data from S&P. Barchart, citing BNEF data, said Lower 48 dry gas production on Monday was 109.6 Bcf/d, up 1.5% from a year earlier.
Regarding demand, BNEF said US gas demand on Monday totaled 71.0 Bcf/d, down 2.0% from a year earlier. Celsius Energy said power burn on June 20 was 34.2 Bcf/d, down 2.5 Bcf/d from the previous day and down 1.2 Bcf/d from the same day last year.
Over the preceding seven-day period, natural gas accounted for 39% of the fuel mix, up 1 percentage point from a year earlier, according to Celsius Energy. The week ending June 20 saw power burn average 35.8 Bcf/d, down 1.7 Bcf/d from the comparable period a year ago.
Meanwhile, estimated LNG net flows to US LNG export terminals were 19.3 Bcf/d on Monday, up 0.9% from the prior week, according to BNEF. Feedgas volumes have remained mainly above 19 Bcf/d since June 14 as the maintenance schedules among LNG facilities on the US Gulf Coast wind down.
On the export side, Gelber & Associates said Europe, the primary destination for US LNG, continues to show strong demand and is currently experiencing a heatwave of undetermined duration.
Looking ahead at the US market, Gelber & Associates said: "For now, July appears to be building a firmer base above $3.00, but a sustained move higher likely needs heat to keep expanding across major load centers and storage injections to come in lighter than expected over the next couple of reports."