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US Natural Gas Update: Prices fall on Milder Weather Forecasts, Ample Supply

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US natural gas futures traded near the bottom of the session range in late Tuesday trading as a milder weather outlook and expectations of even stronger supply outweighed support from near-term cooling demand.

The front-month Henry Hub contract and the continuous contract both fell 3.31% to $2.689 per million British thermal units.

According to Energy Buyers Guide, the latest forecast revisions turned milder after an expected period of intense heat this weekend and into early next week, which is still projected to support elevated cooling demand. However, forecasts for the Midwest and East moderated considerably beyond that period, reducing expectations for sustained heat through the middle of August and weighing most heavily on nearby futures contracts.

Additional pressure came from supply-side developments. Barchart said Energy Transfer announced that the Hugh Brinson Pipeline is expected to operate at its full transportation capacity of 1.5 Bcf/d by Sept. 1, allowing more natural gas to move from the Permian Basin to the Henry Hub pricing point in Erath, Louisiana. The expanded capacity is expected to increase domestic gas supplies.

The accelerated startup of the Hugh Brinson Pipeline marks a significant shift for West Texas natural gas markets, Natural Gas Intelligence said. The additional takeaway capacity could help relieve trapped Permian gas supplies that have kept Waha benchmark prices below zero for much of this year.

Gelber & Associates said US dry gas production has eased to a still strong 110.5 Bcf/d, while Canadian imports have held near a two-week low of 4.8 Bcf/d.

Demand rose by 2 Bcf/d on hot weather in the middle of the country to 80.2 Bcf/d, Barchart said, citing BNEF data. Celsius Energy said power demand was pegged around 44.8 Bcf/d on Aug. 2.

LNG feedgas demand has remained steady at around 18.4 Bcf/d, below capacity due to maintenance work at the Freeport LNG terminal expected to be completed around the end of this month.

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