US natural gas futures extended gains in after-hours trade on Monday, despite steep declines earlier in European and Asian gas markets, as a Middle East peace framework eased concerns about disruptions to energy shipments through the Strait of Hormuz.
The front-month Henry Hub contract and the continuous natural gas contract both gained 1.03%, rising to $3.152 per million British thermal units.
While the prospect of reduced geopolitical risk pressured international gas prices, prompt US gas futures were largely unaffected, according to Aegis Hedging. The firm said the development could, however, temper growth in associated gas production from the Permian Basin.
Prices initially fell to a 2-1/2-week low on cooler weather forecasts before rebounding as traders covered short positions and LNG export demand strengthened.
Barchart said the market remains vulnerable to a short-covering rally given heavy speculative bearish positioning. It said the latest Commitment of Traders report showed hedge funds increased their net-short natural gas futures position by 10,726 contracts in the week ended June 9 to 34,059 contracts, the largest net-short position in more than two years.
Supply remained robust, with US dry gas production estimated at 109.7 billion cubic feet per day on Monday, down about 2 Bcf/d from Friday but up 3.0% from a year earlier, according to BNEF data cited by Barchart.
"Natural gas production continues to hold above 108 Bcf/d, while demand is expected to ease somewhat as more seasonal temperatures return across most of the country," NRG Energy said.
Lower 48 gas demand was estimated at 70.2 Bcf/d on Monday, down 5.7 Bcf/d from Friday but up 7.1% from a year earlier. Celsius Energy estimated late-Monday power-sector gas burn at 28.2 Bcf/d.
Weather remained a headwind for prices. The Energy Buyers Guide said forecasts show no significant heat across major demand regions, keeping the market rangebound as traders await a stronger catalyst.
It said prolonged mild weather into mid-July could ease concerns about summer demand and support a larger end-of-season storage surplus.
Adding to the bearish weather outlook, Commodity Weather Group on Monday shifted forecasts cooler, with below-normal temperatures expected across much of the Midwest through June 24, Barchart said.
LNG feedgas flows to US export plants rose to 19.3 Bcf/d on Monday, up 0.2 Bcf/d from Friday and sharply above last week's levels, BNEF reportedly said.
Vortexa said US LNG exports rebounded to 2.7 million metric tons across 40 cargoes in the last week, the strongest since the first quarter, as Cameron LNG returned from downtime and Freeport LNG completed maintenance.