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US Natural Gas Update: Prices Rise on Restored LNG Feedgas Flows

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US natural gas futures extended gains in after-hours trading on Tuesday as recovering feedgas flows to LNG export terminals boosted demand prospects, helping offset mixed domestic weather-driven consumption.

The front-month Henry Hub contract and the continuous contract both rose 3.53% to $3.258 per million British thermal units.

The market found support from stronger LNG feedgas demand and persistent uncertainty surrounding Middle East energy supplies, even as US weather demand remains uneven, analysts at Gelber & Associates said.

Feedgas deliveries to US LNG export facilities have climbed back toward 19 billion cubic feet per day as seasonal maintenance activity winds down, providing a more stable source of demand after several weeks of weaker flows, Gelber said.

Barchart, citing data from BNEF data, said feedgas flows rose for a seventh consecutive day on Tuesday to a seven-week high of 19.6 Bcf/d, up 11.4% from the prior week. Robust overseas LNG demand could further tighten domestic gas supplies, it said.

On the supply side, US natural gas production remains near record levels. Gelber estimated output at about 109 Bcf/d, while BNEF put Tuesday production at 109.7 Bcf/d, unchanged from the previous day and up 2.7% from a year earlier.

Traders are also awaiting this week's US storage report. Gelber said another inventory build is expected and could exceed the five-year average injection for the period.

Demand data were mixed. BNEF estimated Lower 48 gas consumption at 68.3 Bcf/d on Tuesday, down 1.9 Bcf/d from Monday but up 1.6% from a year earlier. Celsius Energy estimated power-sector gas burn at 25.5 Bcf late Tuesday, down 3 Bcf from the previous day and 0.3 Bcf below year-ago levels.

Weather forecasts remain a key variable for the market. Heat across parts of the South and West is being tempered by milder conditions across much of the eastern half of the US, Gelber said.

NatGasWeather.com forecast temperatures reaching the 90s and low 100s degrees Fahrenheit across portions of the West and South, supporting regional cooling demand. The forecaster expects overall US gas demand to strengthen over the next 10 to 15 days as hotter temperatures spread across the country's interior.

Looking further ahead, Gelber said a developing Super El Nino pattern bears watching because it could result in a milder winter and a less active hurricane season, potentially limiting support for longer-dated natural gas contracts.

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