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US Natural Gas Update: Futures Pull Back From 8-Week High on Cooler Forecasts

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US natural gas futures pulled back on Wednesday after a string of gains pushed prices to an eight-week high, as forecasts for milder weather reduced expected cooling demand and offset support from rebounding LNG feedgas flows.

The front-month Henry Hub contract and the continuous contract both fell 2.6% to $3.033 per million British thermal units.

After a heatwave swept through major population centers in the Mid-Atlantic and Northeast earlier this week, forecasts now call for cooler temperatures heading into the Memorial Day weekend beginning Thursday.

After peaking in the 90s on Tuesday and Wednesday ahead of the holiday weekend, a cold front is forecast to push daytime highs into the low 70s on May 21, then drop further into the mid-50s to low 60s degrees Fahrenheit from May 22 through May 24, accompanied by heavy rain.

Temperatures are then expected to return to 70-80 degrees Fahrenheit by May 28-30. Overnight lows are forecast to remain mostly around 50-60 degrees Fahrenheit.

Barchart, citing BNEF data, said that while heat lingered across much of the US on Wednesday, Lower 48 gas demand rose to 73 billion cubic feet per day, up 800 million cubic feet per day from the previous day and 4.1% higher than a year earlier.

Celsius Energy estimated power-sector gas burn at 26.3 Bcf/d on Wednesday, up 2.4 Bcf/d from Tuesday and 7.3 Bcf/d above year-ago levels.

LNG feedgas demand also strengthened after hitting a multi-month low on Tuesday due to seasonal maintenance. Net flows to US LNG export terminals climbed to 18.1 Bcf/d on Wednesday, up 2.5 Bcf/d from Tuesday and 3% above last week's level as Sabine Pass and Freeport resumed normal operations, Aegis Hedging said.

US Lower 48 dry gas production averaged 109.3 Bcf/d on Wednesday, according to BNEF data cited by Barchart, up 1.1 Bcf/d from Tuesday and 1.4% higher than the same period last year.

Ample domestic gas supplies and expectations for continued storage builds also weighed on prices.

Barchart said consensus estimates for Thursday's weekly US Energy Information Administration storage report call for an injection of 98 Bcf for the week ended May 15, above the five-year average build of 92 Bcf.

NRG Energy and Gelber & Associates expect builds of 95 Bcf and 96 Bcf, respectively. Analysts polled by the Wall Street Journal expect a near-normal 95 Bcf injection, which would put inventories 143 Bcf above the five-year average and 27 Bcf above the year-ago level, the paper said.

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