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US Natural Gas Update: Futures Retreat as Ample Supply Overtakes Hotter Weather Forecasts

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US natural gas prices rallied to a four-week high on Wednesday amid hotter-than-expected weather forecasts, before retreating in after-hours trade as abundant supplies outweighed expectations for stronger demand in the southern US.

The front-month Henry Hub contract and continuous contract both gained 0.25% to $2.783 per million British thermal units.

Prices earlier climbed as high as $2.875/MMBtu, with forecasts pointing to higher demand from hotter-than-normal weather in the US South. The Commodity Weather Group said forecasts shifted hotter on Wednesday, with above-average temperatures expected across the western and southern US through Sept. 2.

Celsius Energy reported power burn at 50.8 Bcf on Aug. 18, down from 51.2 Bcf the previous day but above the seven-day rolling average of 48.4 Bcf/d.

Estimated net natural gas flows to US LNG export terminals were 17.6 Bcf/d on Wednesday, down 2.1% from the previous week as maintenance work continues at Freeport LNG, Barchart said, citing BNEF data.

Higher prices were also supported in early trade by modestly tightened supply. 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.

However, BNEF data showed US Lower 48 dry gas production stood at a robust 112.0 Bcf/d on Wednesday, up 2.7% from a year earlier.

The Energy Buyers' Guide said the inability to sustain the earlier rally underscored the market's reluctance to build significant upside momentum despite supportive late-summer demand.

"Near-term heat remains a source of strength, but healthy storage inventories and strong production continue to limit the market's response as the cooling season winds down," the Energy Buyers' Guide said.

Market attention is now turning to the US Energy Information Administration's weekly storage report due Thursday. US natural gas inventories are currently 6.7% above their five-year seasonal average, underscoring the strength of domestic supplies.

Market participants expect a smaller-than-normal 13-14 Bcf increase in inventories for the week ended Aug. 14, below the five-year average build of 29 Bcf for the period.

Abundant supplies recently caused the EIA to project that US natural gas storage would reach 3,985 Bcf by the end of October, the highest level in a decade and 5% above the five-year average.

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$KMI