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US Natural Gas Update: Prices Continue Slide on Inadequate Demand

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US natural gas futures extended earlier losses in after-hours trading on Tuesday, falling by more than 10 cents as a multi-day selloff continued amid ample supplies and subdued demand.

The front-month Henry Hub contract fell 4.59% to $2.640 per million British thermal units, while the continuous contract declined 3.91% to $2.679/MMBtu.

The market retreated for a fourth consecutive session on Tuesday, with nearest-month futures falling to a three-month low, according to Barchart. The Energy Buyers' Guide said the August contract has lost $0.20 over the past week and $0.62 over the past month. Weakness also spread to the winter strip, which fell $0.06 to $3.51/MMBtu and is once again testing multi-year lows.

Prices remained under pressure after weather forecasts shifted toward cooler conditions across the Midwest and East Coast through Aug. 5, reducing expected demand for air conditioning and natural gas-fired power generation, Barchart said.

Aegis Hedging said data from Criterion showed total US power demand slipped on Tuesday as national temperatures fell below the 10-year average. Market participants expect cooling degree days to bottom out at around 13 on Wednesday before stabilizing near 15 through the first half of August, Aegis said.

According to Gelber & Associates, the latest weather model run added 7.4 Bcf of cumulative demand over the next two weeks, with most of the additional demand concentrated in the 11- to 15-day period. Total demand is projected to reach 117-120 Bcf/d next week, the firm said.

While early August power burn is expected to improve, Gelber said liquefied natural gas feedgas demand is also forecast to increase into the 19.7-20.3 Bcf/d range, potentially creating a much tighter demand balance than current pipeline flows suggest.

However, production is forecast to move above 111 Bcf/d and approach 112 Bcf/d by early August, meaning the market will likely require confirmation from actual power-sector and LNG export demand before assigning significant value to the warmer weather outlook, Gelber said.

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