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US Natural Gas Update: Prices Drop on Reduced Cooling Demand

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Natural gas futures remained under pressure in after-hours trading Monday as weather forecasts indicated little additional warming through mid-June, dampening expectations for stronger cooling demand and limiting price support.

Both the front-month Henry Hub contract and the continuous contract fell 3.13% to $3.187 per million British thermal units.

Updated forecasts pointed to cooler weather in parts of the eastern US during June 6-10, although above-normal temperatures are still expected across the northern two-thirds of the country during June 11-15, according to a note from Aegis Hedging.

Forecasts now show temperatures tracking close to the 10-year average through the outlook period, with nationwide averages expected to plateau near 75 degrees Fahrenheit during the second week of June. Cooling degree day expectations have also leveled off at roughly 10 per day by mid-month, Criterion said, according to Aegis.

Ample supplies and muted demand expectations largely offset support from overseas geopolitical developments. Iran suspended talks with the US, saying it would not return to negotiations unless Israeli strikes against Lebanon cease. The development helped lift European natural gas prices by 6%.

In the US Lower 48, dry gas production was estimated at 107.5 billion cubic feet per day on Monday, down 3.1 Bcf/d from Friday but up 0.3% from a year earlier, Barchart reported, citing BNEF data. Aegis said market participants viewed the decline cautiously, noting it may reflect first-of-the-month pipeline nomination adjustments, with a clearer production picture expected later in the trading cycle.

Trading Economics reported that Lower 48 gas production averaged 109.4 Bcf/d in May, slightly below April's 109.8 Bcf/d average.

Demand showed some improvement. Lower 48 state gas demand reached 69.7 Bcf/d on Monday, up 2 Bcf/d from Friday and 10% higher than a year ago, according to Barchart.

Power-sector consumption also strengthened. Celsius Energy said power burn totaled 23.6 Bcf on Monday, up 4.1 Bcf from Sunday and 3.8 Bcf above year-ago levels. Natural gas accounted for 38% of the US power generation fuel mix, up 1.1 percentage points from a year earlier.

Meanwhile, estimated net feedgas flows to US LNG export terminals were 17.8 Bcf/d on Monday, down 0.7 Bcf/d from Friday and 3.3% lower than the previous week. Aegis said nominations into the Sabine Pass export facility declined as pipeline outages affected several systems serving the terminal.

US LNG exports remained subdued, according to Vortexa. Weekly LNG loadings totaled 2.3 million metric tons across 32 cargoes, unchanged from the prior week. Planned maintenance at the Freeport and Cameron export terminals has continued to weigh on output, while the new Golden Pass facility has not loaded a cargo in more than three weeks. However, the QatarEnergy-controlled tanker Barzan is expected to arrive this week to load what would be Golden Pass's third cargo, Vortexa said.

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