Nat-Gas Prices Rally on Hot US Weather Forecasts

Nat-gas prices surged to a four-week high on Wednesday as forecasts of extreme heat in the US South and West pushed demand for air conditioning. The Commodity Weather Group noted that above-average temperatures were expected across the western and southern US through September 2, potentially boosting demand from electricity providers.

US natural gas storage levels, which were already running above their five-year average, were projected to reach a 10-year high by October, according to the Energy Information Administration. This oversupply was bolstered by an increase in US natural gas production, with 112.0 billion cubic feet per day in the week ending August 14, surpassing the five-year average build.

Lower demand for natural gas in the Lower 48 states, which rose by 4.3% year-over-year, also contributed to the price rally. However, a bearish factor is the EIA's projection of high nat-gas storage levels by October, while a medium-term negative factor is speculation of an El Niño weather system bringing warmer temperatures, reducing heating demand.

Despite these factors, the Edison Electric Institute reported a 2.36% year-over-year increase in US electricity output for the week ending August 15.