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US Natural Gas Update: Futures Weaken on Cooler Forecasts

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US natural gas futures recovered some losses in midday trading Wednesday after an earlier sharp drop, as weaker weather forecasts reduced expected demand.

The front-month Henry Hub contract and the continuous contract were both down 2.81% at $3.148 per million British thermal units.

Liquidity Energy said natural gas opened the US session lower after posting a new weekly high overnight, noting that despite early strength, the market was showing signs of a possible reversal as prices pulled back from recent highs.

Aegis Hedging said that updated forecasts for late June and early July reduced expectations for Midwest temperatures by over 12 degrees Fahrenheit, contributing to softer demand expectations.

Gelber & Associates said the market is turning more cautious, with strong export demand being offset by a less supportive weather outlook. It noted fundamentals still show solid LNG strength, with net LNG exports at 19.1 Bcf/d and steady demand from Mexico.

Aegis Hedging said feedgas demand rose to its highest level since April, adding that Golden Pass LNG recorded 425 million cubic feet per day of feedgas demand on Tuesday and nominated 480 MMcf/d on Wednesday.

On supply, production remains the main limit on further price gains, Gelber said. Output is holding near 110.3 Bcf/d, keeping the market well supplied as Canadian imports have eased.

Attention now shifts to Thursday's Energy Information Administration's storage report. Gelber expects a 74 Bcf injection, smaller than the 95-Bcf build seen in the same week last year, although inventories remain above the five-year average.

The report is expected to be a key factor in determining whether LNG strength and weather-driven demand can support further price gains, Gelber said.

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