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US Natural Gas Update: Futures Slip as Softer Demand Pressures Market

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-- US natural gas futures fell in midday trade on Tuesday, snapping a four-session winning streak as forecasts pointed to weaker domestic demand and milder near-term temperatures.

Both the front-month Henry Hub contract and the continuous contract slipped 2.41% to $2.798 per million British thermal units.

Demand is expected to ease by 4 billion cubic feet per day on Monday to 95.4 Bcf/d on Tuesday, driven by lower residential and commercial consumption as mild weather is forecast across most of the country outside the Northeast and Midwest, NRG said.

Power sector gas demand, however, rose by about 2.3 Bcf/d to 32.4/Bcf/d, reflecting higher electricity use as temperatures rise.

Aegis Hedging said residential gas demand is relatively small and stable in summer, typically running between 8-11 Bcf/d and averaging about 9.5 Bcf/d from May through September last year.

By contrast, power demand is far greater and more volatile, averaging 41.1 Bcf/d last year with sharp weather-driven swings. As a result, electricity demand has become the dominant driver of gas market moves in warmer months.

On the supply side, production has eased as producers scale back output amid low prices, Trading Economics said.

Gelber and Associates said production stands at 110.0 Bcf/d and is expected to increase next week, while Canadian imports remain at 4.4 Bcf/d, well below late-April peaks, leaving supply conditions steadier than demand.

Storage levels remain 7% above the historical average.

LNG feedgas flows have also softened in recent days, with NRG estimates at 17.3 Bcf/d on Tuesday. Gelber and Associates said LNG feedgas is currently flowing at 17.8 Bcf/d, a two-week low and roughly 11% below the late-April high, as spring maintenance continues to limit exports.

Aegis lists Cameron, Calcasieu Pass, and Corpus Christi LNG as current maintenance sites.

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