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US Natural Gas Update: Futures Rise as Weather Forecasts Shift Warmer

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US natural gas futures rose in midday trade on Wednesday as weather forecasters expect increased cooling demand across large swaths of the US as temperatures rise into June.

The front-month Henry Hub contract and the continuous contract both gained 2.24%, trading at $3.238 per million British thermal units.

Forecasts indicate warmer-than-average temperatures in the northern half of the US through the end of the week, while above-average temperatures become concentrated in the central part of the country next week, NRG said.

Trading Economics said mostly above-normal temperatures are expected through June 17, which is expected to boost gas consumption from power generators as air-conditioning use rises.

The 1-15 day outlook added 5.6 degrees to the Lower 48 forecast, keeping the demand setup pointed more firmly toward cooling-season strength, and power burn remains the clearest bullish demand driver as the market looks into mid-June, Gelber & Associates said.

US production is expected to rise to just over the May average of 107.5 billion cubic feet per day, NRG said. Trading Economics said its data showed gas production in the Lower 48 states averaged 108.8 Bcf/d so far in June, down from 109.7 Bcf/d in May.

NRG said it expects the US Energy Information Administration to report a 99 Bcf storage injection on Thursday for the week ended May 29. That would be below the five-year average build of 101 Bcf. Inventories are already about 6% higher than historical levels at this time of year.

On the export side, LNG export feedgas is forecasted to strengthen to 16.5 Bcf/d after falling below 16 Bcf/d yesterday, NRG said.

Trading Economics said average feedgas flows to major LNG export facilities declined from 17.1 Bcf/d in May to 16.0 Bcf/d in early June due to seasonal maintenance at several plants, with daily flows falling to a four-month low.

Despite scheduled maintenance, US LNG exports fell only slightly to 33.8 metric tons in May from 33.99 mt in April, Reuters reported on Tuesday.

Cargoes to Asia rose 2.71 mt, or 36%, to a one-year high at 3.68 mt in May, driven by JKM's premium over TTF, according to Reuters data. JKM averaged $17.75/MMBtu versus TTF's $16.11 per megawatt-hour. Europe still received 5.13 mt, or 51% of US May exports, down from 6.14 mt in April.

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