U.S. natgas futures rise near 3% on forecasts for more heat next week

U.S. natural gas futures gained almost 3% on Monday as forecasts for hotter weather and higher cooling demand next week lifted prices from two-week lows hit last week.

Front-month gas futures for August delivery on the New York Mercantile Exchange rose 6.1 cents, or 2.7%, to settle at $2.312 per million British thermal units. On Friday, the contract fell to its lowest since July 2.

Gas speculators trimmed their net short positions on the NYMEX and Intercontinental Exchange last week to their lowest level in a month, according to data from the U.S. Commodity Futures Trading Commission (CFTC). That move came despite a decline in the number of speculative net longs on the NYMEX to their lowest since November 2011.

After a brutal heat wave blanketed much of the country last week, meteorologists forecast the weather would remain cooler than normal this week before turning warmer than normal next week.

With the weather expected to heat up again in early August, data provider Refinitiv projected demand in the lower 48 U.S. states would rise from 89.6 billion cubic feet per day (bcfd) this week to 91.1 bcfd next week as power generators burn more gas to meet higher air conditioning use.

That is higher than Refinitiv’s demand forecasts on Friday of 89.7 bcfd for next week. The power sector is on track to burn more than 40 bcfd of gas on average this month, which would break the 39.9 bcfd monthly record set in July 2018, according to federal energy projections.

Since Tropical Storm Barry hit the central Louisiana coast on July 13, energy firms have been returning Gulf of Mexico wells and platforms to service.

Gas production from the offshore Gulf of Mexico was expected to rise to 2.4 bcfd on Monday from a low of 1.2 bcfd on July 13-15, according to Refinitiv. That compares with a high of 3.1 bcfd during the first week of July.

With the gains in the Gulf, output in the Lower 48 states edged up to a near two-week high of 89.6 bcfd on Sunday from an eight-week low of 87.6 bcfd on July 16, according to Refinitiv. That compares with an all-time daily high of 91.1 bcfd on July 5 and an average of 82.7 bcfd during this week last year.

The amount of gas flowing to the nation’s liquefied natural gas (LNG) export terminals, meanwhile, dipped over the weekend to around 5.9 bcfd on Sunday from a record high of 6.4 bcfd on Friday, according to Refinitiv data, due to a small decline at Cheniere Energy Inc’s Corpus Christi in Texas.

Analysts said utilities likely added a near normal 46 billion cubic feet (bcf) of gas into storage during the week ended July 19. That compares with an increase of 27 bcf during the same week last year and a five-year (2014-18) average build of 44 bcf for the period.

If correct, the increase would boost stockpiles to 2.579 trillion cubic feet (tcf), 5.2% below the five-year average of 2.720 tcf for this time of year.

The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33% below that average in March 2019. With production near record highs, analysts expect stockpiles will reach a near-normal 3.7 tcf by the end of the summer injection season on Oct. 31.