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US Natural Gas Update: Futures Slide to Two-Week Low on Warm Weather Outlook

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US natural gas futures extended losses in after-hours trade on Wednesday, falling for the second straight session to a two-week low as forecasts for warmer weather into early fall raised concerns about heating demand heading into winter.

The front-month Henry Hub contract and the continuous contract each fell 3.70% to $2.808 per million British thermal units.

Milder weather and strong US supplies pressured prices, although a sharp rise in European gas prices offered some support. European natural gas prices climbed to a 3.5-year high as the conflict in the Middle East escalated and European storage levels remained well below historical averages ahead of winter.

Barchart, citing The Commodity Weather Group, said US forecasts shifted hotter, with above-average temperatures now expected through Sept. 18.

For winter, the hotter outlook reinforces expectations that a Super El Nino weather pattern could bring warmer-than-normal temperatures this fall and winter, potentially reducing gas heating demand.

Lower-48 gas demand was 80.2 Bcf/d Wednesday, up 16.4% from a year earlier, Barchart said, citing BNEF. Celsius Energy said average powerburn for the week ended Sept. 8 was 44.4 Bcf/d, up 3.4 Bcf/d from a year earlier. Powerburn on Sept. 8 was 42.0 Bcf/d, up 5.5 Bcf/d year over year.

Pinebrook Energy Advisors said temperature patterns are set to normalize considerably, with population-weighted cooling degree days falling after Wednesday and trending lower into the shoulder season.

Estimated LNG net flows to US export terminals were 19.8 Bcf/d Wednesday, up 4.8% from the prior week, according to BNEF. Annual maintenance at Cove Point LNG in Maryland, however, could reduce feedgas demand from Appalachia by about 850 MMcf/d for up to three weeks beginning Sept. 19.

US production remained strong. Trading Economics put average September output at 112.9 Bcf/d, up from 111.5 Bcf/d in August, a record, and 110.7 Bcf/d in July.

Traders are now focused on Thursday's US Energy Information Administration storage report. Gas inventories stood at 3,214 Bcf as of Aug. 28, 160 Bcf, or 5.2%, above the five-year average, according to the EIA.

The EIA is expected to report a 28 Bcf injection for the latest week, according to a Wall Street Journal survey of analysts. That would be below the five-year average injection of 52 Bcf and narrow the inventory surplus to 136 Bcf from 160 Bcf the previous week.

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