Hot US Weather Forecasts Push Nat-Gas Prices Higher
On Friday, the Nymex natural gas (NGU26) closed up 0.040 (+1.46%). High temperature forecasts for much of the US could drive up nat-gas demand from power providers needing to run air conditioners. The Commodity Weather Group predicted hotter-than-average temperatures across Texas, the Southwest, and the Interior West through September 4.
The Electric Reliability Council of Texas (ERCOT) forecast electricity demand would surpass all-time records through September 4. US dry gas production on Friday was 113.1 bcf/day (+4.4% y/y), while gas demand was 80.9 bcf/day (+2.7% y/y). LNG net flows to US export terminals were 17.7 bcf/day (-2.6% week-over-week).
In a positive sign, US electricity output rose 2.36% y/y to 101,498 GWh in the week ending August 15, according to the Edison Electric Institute. However, the EIA projected US nat-gas storage levels would reach a 10-year high of 3,985 bcf by the end of October, 5% above the five-year average. US gas inventories are currently 6.7% above their five-year seasonal average, indicating ample supplies.
The Hugh Brinson pipeline will be able to transport 1.5 bcf/day starting September 1, allowing more Permian Basin gas to flow to the Henry Hub. A long-term bearish factor is speculation that an El Niño weather system could bring warmer temperatures to the Northern Hemisphere this fall and winter, reducing nat-gas heating demand.
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