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US Natural Gas Update: Prices Strengthened on Forecast Heat in the East Next Week

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US natural gas futures extended gains in after-hours trade on Friday to a six-week high due to an expected increase in cooling demand from the US East Coast next week.

Front-month Henry Hub futures and the continuous contract both rose by 2.32% to $2.961 per million British thermal units.

Weather forecaster Vaisala said Friday that above-average temperatures are expected across the Rockies and the East Coast for May 25-29, Barchart reported.

The expected heat wave is already leading to seasonal highs in natural gas demand from the power generation sector, the Energy Buyers Guide said in a Friday note.

"That consumption is approaching 35 Bcf per day for the first time since early March and is expected to hit new highs early next week as the heat peaks in the populous East," it said, adding that cooling degree day totals in the days ahead are expected to stay well below typical peak-summer levels, but the unusually early arrival of heat is drawing close attention from natural gas traders anticipating a potentially hotter-than-normal summer overall.

The market also drew support from expectations that the Strait of Hormuz will remain closed for the foreseeable future, following a high-level summit between US and Chinese leaders that failed to yield progress toward reopening the key shipping route. Continued disruptions could increase demand for US exports to help offset lost supplies from Qatar and the UAE.

Additionally, a lower-than-expected inventory injection boosted sentiment on Thursday when the US Energy Information Administration reported an 85 billion cubic foot injection into storage for the week ended May 8. The build fell short of analysts' expectations and was well below the 109 Bcf increase recorded in the same week a year earlier. The latest data left the storage surplus versus the five-year average at 6.5%, while the surplus over the year compressed to 2.3%, the EIA said.

According to Barchart, citing BNEF data, US gas production averaged 109.7 Bcf/d on Friday, up 3.2% year over year. Demand on Friday totaled 67.4 Bcf/d, an increase of 0.4% from a year earlier, and net LNG feedgas flows to US export terminals were estimated at 17.5 Bcf/d, up 1.9% week over week.

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