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US Natural Gas Update: Futures Rise on Hotter Short-Term Forecasts

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US natural gas futures rose on Tuesday as intense late-summer heat across parts of the country supported demand, helping offset record-high production and above-average storage inventories.

The front-month Henry Hub contract and the continuous contract each gained about 2.60% to $2.760 per million British thermal units.

Natural gas prices climbed as forecasts pointed to prolonged heat across the southern and western US, with particularly high temperatures in Texas expected to drive air-conditioning demand and electricity consumption higher, Trading Economics said.

Temperatures in Houston are forecast to average around 100 degrees Fahrenheit from Aug. 20-23. Peak demand on the Texas power grid could also reach a new record as wind generation declines, potentially increasing reliance on natural gas-fired power plants.

Price gains were capped by exceptionally strong US production. Average output in the Lower 48 states has reached 111.6 billion cubic feet per day in August, surpassing July's record of 110.7 Bcf/d, Trading Economics said.

Lower 48 production fell 1.2 Bcf/d to 111.8 Bcf/d on Tuesday, while Canadian imports eased to 4.9 Bcf/d, leaving total supply at 116.8 Bcf/d, according to Gelber & Associates.

Total demand rose to a two-week high of 117.4 Bcf/d, led by power-sector gas consumption, which increased 0.7 Bcf/d to 51.0 Bcf/d as late-summer heat continued to support gas-fired generation, the analysts said.

LNG feedgas demand also improved to 18 Bcf/d as Freeport LNG increased runs during maintenance, although softer exports to Mexico offset part of the increase, G&A said.

Trading Economics pegged natural gas deliveries to the nine major US LNG export facilities at an average of 17.2 Bcf/d so far in August, unchanged from July.

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