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US Natural Gas Update: Futures Up on Spreading Heatwave, Robust LNG Demand

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US natural gas futures gave up part of their earlier gains but remained higher on the day, supported by forecasts of an expanding heat wave across the eastern half of the country, expected to drive cooling demand, along with strong LNG feedgas consumption.

The front-month Henry Hub contract and the continuous contract were both up 2.39% at $3.257 per million British thermal units.

The market found support from weather forecasts calling for dangerous heat to spread from the Midwest into the Northeast over the coming days. The National Weather Service said on Tuesday that an intense heat wave east of the Rockies will strengthen beneath a powerful upper-level ridge, with afternoon highs in the upper 90s to above 100 degrees Fahrenheit across parts of the Midwest and Northeast.

Combined with high humidity, heat index values are expected to range from 105 to 115 degrees Fahrenheit from Kansas City to Boston. Nearly 180 million Americans are under an Extreme Heat Warning or Heat Advisory ahead of the Fourth of July holiday weekend. Forecasters expect the heat to peak on July 3-4.

The hotter weather is already lifting natural gas consumption. Lower-48 gas demand rose to 79.4 billion cubic feet per day on Tuesday, up 4 Bcf/d from the previous day and 3.4% above year-ago levels.

According to Celsius Energy, gas-fired power generation demand, or power burn, reached 37.4 Bcf/d on Monday, up 2.1 Bcf/d from the previous day but 5.1 Bcf/d below the same period last year. Meanwhile, the Energy Buyers Guide estimated natural gas demand from the power sector exceeded 47.5 Bcf/d on Tuesday, the highest daily level so far this summer, with demand expected to surpass 50 Bcf/d later this week.

Aegis Hedging said cooling degree days are expected to climb into the weekend to close to 18 CDDs before tapering throughout the rest of the forecast period to around 14 CDDs.

Strong LNG export demand also underpinned prices by tightening domestic supplies. Barchart, citing BNEF data, said US LNG feedgas consumption rose to 19.7 Bcf/d on Tuesday, up 0.5 Bcf/d from the previous day and 0.9% from a week earlier, the highest level in more than two months.

Robust domestic production, however, provided some downward pressure on prices. Lower-48 dry gas output averaged 112.2 Bcf/d on Tuesday, up 1 Bcf/d from Monday and 2.9% higher than a year earlier, adding to ample inventories.

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