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US Natural Gas Update: Futures Gain on Persistent Heat Pushes Cooling Demand Higher

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US natural gas futures rose in midday trading Friday as persistent above-average temperatures across the southern and western US boosted cooling demand forecasts.

The front-month Henry Hub contract and the continuous contract each rose 1.17% to $2.765 per million British thermal units.

Forecasts of sustained high temperatures across large swaths of the country through the first week of September lifted predictions of cooling degree days, while prompting electric utilities to burn substantial volumes of natural gas to meet peak grid loads.

Celsius Energy reported power burn on Thursday reached 50.9 billion cubic feet, up 3.8 Bcf from the previous day and 2.6 Bcf above the same day a year earlier.

The weather-related demand boost is expected to be short-lived. Gelber & Associates said demand should remain relatively firm through next week before easing into the shoulder season as cooling loads pass their seasonal peak.

On the supply side, Gelber said Lower 48 production was 112.1 Bcf per day on Friday, while Canadian imports slipped to a two-week low of 4.5 Bcf/d. Bloomberg said output on Friday reached around 113.1 Bcf/d, up 4.4% from a year earlier.

Bloomberg reported Friday that new pipeline capacity in West Texas has lifted day-ahead prices at the key Waha hub in the Permian region by reducing in-basin supply. Waha spot prices have averaged more than $2/MMBtu so far this week.

However, increasing volumes of gas arriving in East Texas from the Permian are weighing on the Henry Hub price.

Gelber said LNG feedgas rose back to 18 Bcf/d as Golden Pass continued increasing commissioning volumes. Trading Economics said gas flows to the nine major US LNG export facilities averaged 17.2 Bcf/d so far in August, below June's record.

The latest data from the US Energy Information Administration showed utilities added 16 Bcf to storage last week, below both the 19 Bcf injection a year earlier and the five-year average of 29 Bcf.

Inventories nevertheless remain above seasonal norms, supported by record production. Gelber said Criterion still projects an injection-season peak near 3,996 Bcf, even after lowering that estimate by 12 Bcf overnight.

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