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US Natural Gas Update: Futures Pare Thursday's Losses

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US natural gas futures rebounded from Thursday's losses in midday Friday trade, partially recovering some ground as traders focused on some bullish market signals despite near-term supply pressure.

The front-month Henry Hub contract and the continuous futures contract both gained 1.89%, to trade at $2.912 per million British thermal units.

NRG Energy said the natural gas market experienced downward pressure Thursday after the US Energy Information Administration reported a 41 billion cubic feet storage injection, a build that exceeded most analyst expectations.

Some forecasts had anticipated a larger increase of up to 45 Bcf, but the report was still viewed as bearish enough to push the prompt-month contract down $0.07 to below $2.85/MMBtu from a pre-release high of over $2.95/MMBtu before settling around $2.86/MMBtu.

Friday's weather outlook offered limited direction for prices, NRG said. Most major population centers are experiencing seasonally normal temperatures, although warmer conditions persist across parts of the Midwest. The West Coast is also expected to see a hot end to July.

Gelber & Associates said the market remains caught between competing fundamental forces. The latest 1-15 day temperature outlook was largely unchanged nationwide, with warmer revisions across central and western regions offset by cooler adjustments in the East.

The firm said weather remains supportive in some areas but is not widespread enough to significantly tighten the national supply-demand balance.

Natural gas production remains elevated at about 109.5 Bcf/d, with the weekly average near 110 Bcf/d. Net Canadian imports are averaging 6.2 Bcf/d for the week, Gelber said.

Demand remains supported by power generation and LNG demand. Power burn is estimated at 47.5 Bcf/d, with a weekly average of 46.5 Bcf/d, while LNG feedgas demand is near 18 Bcf/d, averaging 18.2 Bcf/d over the week, Gelber said.

With total supply near 116 Bcf/d exceeding demand of roughly 113 Bcf/d, the near-term market remains relatively loose, limiting the potential for a sustained rally.

Aegis Hedging noted that exports to Mexico are also expected to provide additional support over the coming weeks.

US natural gas exports to Mexico are currently around 7.8 Bcf/d, almost 1 Bcf/d below recent highs, but are forecast to recover toward 8.3 Bcf/d as cooling demand rises across northern Mexico.

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