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US Natural Gas Update: Futures Prices Soften in Choppy Trade

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US natural gas futures extended losses in after-hours trade on Tuesday, though price action in the expiring June contract remained volatile as focus shifted toward July and the next phase of weather-driven demand.

The front-month Henry Hub contract slipped 0.58% to $2.89 per million British thermal units, while the continuous contract fell 0.40% to $3.009/MMBtu.

The June contract, which expires Wednesday, traded as low as $2.878/MMBtu, below Friday's settlement of $2.907, and reached an intraday high of $2.989/MMBtu.

Weather models turned cooler over the weekend, weighing on sentiment. The overall Lower 48 forecast cooled by 6.7 degrees Fahrenheit, according to Aegis Hedging. The firm noted, however, that the cooler revisions were concentrated in the one- to two-week outlook, while temperatures at or above seasonal norms are still expected through mid-June.

"The setup is still defined by a familiar late spring tension, where mild stretches keep balances comfortable, but any meaningful heat building across the South and East can quickly lift power burn and improve sentiment at the front of the curve," Gelber & Associates said in a Tuesday note.

Lower-48 gas demand was estimated at 66.6 billion cubic feet per day on Tuesday, down 2.5 Bcf/d from Friday but 6.8% higher than a year earlier, according to BNEF.

Aegis Hedging said strengthening power-sector demand continued to underpin the market. Power demand rebounded by nearly 6 Bcf/d over the weekend to 36.1 Bcf/d, the firm said. Celsius Energy estimated Monday power burn at 30.8 Bcf, up 0.3 Bcf day-on-day and 2.9 Bcf above year-ago levels.

The seven-day average for May 19-25 stood at 32.3 Bcf/d, up 3.6 Bcf/d from the same period last year.

On the supply side, Lower-48 dry gas production rose to 110.6 Bcf/d on Tuesday, up 500 million cubic feet per day from Friday and 3.1% above year-earlier levels, according to BNEF.

Barchart said some short covering emerged in natural gas futures after stronger LNG export demand pointed to tighter domestic balances. Gas flows to US LNG export terminals rose to 18.4 Bcf/d on Tuesday, up 8.8% week-over-week, according to BNEF data.

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