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US Natural Gas Update: Futures Gain as Heat Boosts Power Demand

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US natural gas futures rose in midday trade on Wednesday as hotter-than-normal weather across the South and West boosted near-term demand, outweighing strong domestic supplies.

The front-month Henry Hub contract and the continuous contract both gained 1.98% to $2.831 per million British thermal units.

Hot weather, particularly in Texas, has increased demand for air conditioning and gas-fired power generation, supporting overall natural gas consumption, Trading Economics said.

Celsius Energy said power burn on Aug. 17 reached 51.2 billion cubic feet per day, above the seven-day average of 48.2 Bcf/d for the week ended that day.

NRG said the front-month contract's advance was being driven by a favorable late-August weather window rather than a sustained supply shortage.

The additional heat is tightening the prompt market balance before cooling demand fades, with production expected to recover into September, NRG said.

Supply has also tightened modestly. Gelber & Associates said Lower 48 production fell 0.6 Bcf/d to 111.6 Bcf/d, with outages in the Northeast accounting for most of the decline. Canadian imports also dropped to a two-week low of 4.7 Bcf/d, pulling total US supply down to 116.3 Bcf/d.

NRG and Gelber & Associates both expect the US Energy Information Administration's storage report on Thursday to show a 15 Bcf injection, sharply below last week's 36 Bcf build and close to the 13 Bcf injection reported for the comparable week last year.

A storage build near that estimate would indicate that strong power-sector demand has materially slowed inventory accumulation and could lend further support to the recent price rebound, NRG said. Even so, end-of-season inventories are projected to remain slightly above 4 trillion cubic feet.

LNG export feedgas flows were expected to decline to 17.60 Bcf/d on Wednesday, below the 30-day moving average of 17.99 Bcf/d, according to the Bloomberg LNG Feedgas Model. The decline was primarily attributed to scheduled maintenance at LNG facilities, although export demand remained strong.

Trading Economics said flows to the nine major US LNG export facilities averaged 17.2 Bcf/d in August, unchanged from July and just below June's record level.

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