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U.S. natgas futures soar to 8-month high on hot weather forecasts

U.S. natural gas futures soared on Friday to their highest since December on rising liquefied natural gas (LNG) exports and forecasts for the weather to remain hot and air conditioning demand high through the end of August.

“Gas prices are moving higher … as a new surge of buying momentum enters an unsuspecting market,” said Daniel Myers, market analyst at Gelber & Associates in Houston, noting “There is widespread consensus that warmer than normal temperatures will extend the summer into (September).”

Front-month gas futures rose 17.4 cents, or 8.0%, to settle at $2.356 per million British thermal units, their highest close since Dec. 5.

That put the contract up 5% for the week after it soared 24% last week.

Although U.S. and European gas contracts mostly trade on their own fundamentals, a 45% jump in prices at the European Title Transfer Facility (TTF) benchmark in the Netherlands so far in August helped pull U.S. gas up about 30% this month. That made it profitable for more U.S. LNG cargoes to go to Europe.

U.S. LNG exports were on track to rise in August for the first time in six months. Pipeline gas flowing to the plants climbed to 4.2 billion cubic feet per day (bcfd) so far this month from a 21-month low of 3.3 bcfd in July.

With LNG exports rising and the weather expected to remain hot through the end of August, Refinitiv projected U.S. demand, including exports, will increase from an average of 89.7 bcfd this week to 90.1 bcfd next week.

Power usage in Texas, meanwhile, is expected to reach a record high on Friday and next-day electric prices in the West rose to their highest in years as a brutal heat wave blankets much of the western half of the country.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski and Marguerita Choy)

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