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US Natural Gas Update: Prices Edge Up on Hot Weather Ahead of Inventory Data

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US natural gas futures inched higher in after-hours trade on Wednesday as forecasts for above-normal temperatures across much of the country supported expectations for stronger air-conditioning demand and increased gas-fired power generation.

The front-month Henry Hub contract and the continuous contract both gained 0.59% to trade at $2.921 per million British thermal units.

The Commodity Weather Group said forecasts turned hotter, with above-average temperatures expected across most of the northern US through July 19, reinforcing expectations for elevated cooling demand.

Analysts at Gelber & Associates said although prices were supported by strong power-sector demand driven by persistent heat, ongoing maintenance at LNG export facilities and robust domestic production continued to cap gains, keeping prices below the key $3.00/MMBtu level.

"The move higher looks more like stabilization than a decisive shift in momentum," Gelber & Associates said, noting that traders are still "waiting for a stronger catalyst from weather or Thursday's storage report before buying into a larger rebound."

The market's focus has now shifted to Thursday's US Energy Information Administration weekly storage report.

Gelber & Associates expects a storage injection of about 35 billion cubic feet. It said storage levels remain a headwind for prices, with inventories continuing to sit above the five-year average following last week's larger-than-expected injection.

Total lower 48 gas demand rose to 83.1 Bcf per day, up 2.2 Bcf/d on the day and 4.1% above year-ago levels. According to Celsius Energy, power burn totaled 47.5 Bcf/d on July 14, up 1.2 Bcf/d from the previous day but 1.5 Bcf/d below the same day last year. For the week ended Tuesday, power burn averaged 45.0 Bcf/d, down 2.3 Bcf/d from the comparable period a year earlier.

Estimated net gas flows to US LNG export terminals held steady at 17.8 Bcf/d on Wednesday, according to Barchart citing BNEF data, though volumes were down 3.3% from a week earlier.

The decline reflects maintenance at Freeport LNG, which began on July 10 and is scheduled to continue through the end of August.

On the production side, lower 48 dry gas output was estimated at 111.2 Bcf/d on Wednesday, down 0.9 Bcf/d from Tuesday but up 3.2% from a year earlier.

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