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US Natural Gas Update: Hits Eight-Week High on Eastern Heatwave Demand

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US natural gas futures extended gains in after-hours trading on Tuesday, rising for a fifth straight session and pushing benchmark prices to an eight-week high as an early-season heatwave across the eastern US fueled expectations of stronger power-sector demand.

The front-month Henry Hub contract and the continuous contract each rose by 3.04% to $3.116 per million British thermal units.

Soaring temperatures across the East Coast were sharply increasing air-conditioning demand and lifting gas-fired power burn. Phil Flynn, senior analyst at Price Futures Group, said temperatures along the East Coast could run 20 to 30 degrees Fahrenheit above seasonal norms, threatening or breaking more than 150 temperature records in major cities. "Highs in the 80s and 90s (with triple-digit heat possible in parts of the South and Texas) will spike air-conditioning use and power burn," Flynn said.

Weather forecasters said the heatwave in the US Northeast was expected to ease by Thursday. Barchart, citing The Commodity Weather Group, said forecasts had shifted cooler, with mostly normal seasonal weather expected across much of the US between May 24-28.

Still, near-term demand remained firm. Gelber & Associates said Tuesday's power burn was tracking near 38.9 billion cubic feet per day, "enough to keep weather sensitivity in the front of the market." Barchart, citing BNEF data, said total Lower 48 gas demand on Tuesday was estimated at 72.2 Bcf/d, up 2.3 Bcf/d from overnight levels and 5.5% higher than a year earlier.

Despite stronger consumption, analysts noted the market remained comfortably supplied. Gelber said US dry gas production was estimated at 108.6 Bcf/d, while Canadian imports were running at 4.7 Bcf/d. "The market is not short of supply, but it is becoming more willing to reward heat when power burns are carrying more of the domestic load," the firm said.

Gains were capped by weaker LNG feedgas demand as seasonal maintenance at US export facilities reduced feedgas flows to a four-month low. Estimated net gas flows to US LNG export terminals on Tuesday fell by 2.3 Bcf/d to 15.6 Bcf/d, down 15.3% from levels seen a week earlier.

"If the warmer turn verifies, Henry Hub should keep defending the $3 handle because the balance is finally getting meaningful summer demand from power," Gelber said. "If feedgas stays soft and the cooler front-end limits immediate CDD [cooling demand day] growth, the rally could pause even with prices still technically supported above $3."

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