U.S. natgas futures rise as hot weather boosts air conditioning demand

U.S. natural gas futures climbed on Friday on forecasts hotter-than-normal weather will keep air conditioners humming through late July.

The higher price move comes despite a slow increase in output and a drop in liquefied natural gas(LNG) exports to their lowest since early 2018.

Front-month gas futures rose 2.6 cents, or 1.5%, to settle at $1.805 per million British thermal units. For the week, the contract gained about 4%, putting it up for a second week in a row after soaring 16% last week.

Traders predicted that Tropical Storm Fay, which is heading for the New York City area, would likely have little impact on gas demand.

Refinitiv said production in the Lower 48 U.S. states averaged 88.1 billion cubic feet per day (bcfd) so far in July, up from a 20-month low of 87.0 bcfd in June but still well below the all-time monthly high of 95.4 bcfd in November.

As the weather heats up, Refinitiv forecast U.S. demand, including exports, will rise from 89.3 bcfd this week to 91.4 bcfd next week and 93.3 bcfd in two weeks.

Pipeline gas flowing to U.S. LNG export plants averaged just 3.1 bcfd (32% utilization) so far in July, down from a 20-month low of 4.1 bcfd in June and a record high of 8.7 bcfd in February. Utilization was about 90% in 2019. Flows to Freeport LNG in Texas fell to zero for a fourth day in a row the first time since July 2019 when its first liquefaction train was still in test mode.

U.S. pipeline exports, meanwhile, were mixed.

Refinitiv said pipeline exports to Canada averaged 2.4 bcfd so far in July, up from 2.3 bcfd in June but still below the all-time monthly high of 3.5 bcfd in December. Pipeline exports to Mexico averaged 5.4 bcfd for a second month in a row, which is down from a record 5.6 bcfd in March.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski and David Gregorio)