Natural gas prices moved higher as warmer US weather forecasts strengthened expectations for increased cooling demand. Hotter weather usually means greater electricity use, which can increase demand for gas-fired power generation.
US natural gas futures climbed to around $3.36 per MMBtu, the highest level since early February. The move followed forecasts for above-normal temperatures across parts of the United States into mid-June, raising expectations that air-conditioning use will increase.
The latest storage report showed a 92 billion cubic feet build for the week ended May 22. This was below expectations for a 95 billion cubic feet increase, below the 104 billion cubic feet added in the same week last year, and below the five-year average build of 97 billion cubic feet.
Supply also moved slightly lower. Average gas production in the Lower 48 states was reported at around 109.4 to 109.5 billion cubic feet per day in May, down from 109.8 billion cubic feet per day in April. The decline is modest, but it matters more when demand is rising. A combination of warmer weather, slower inventory growth and slightly lower production can make the market more sensitive to fresh data.
Technical positioning added another layer to the move. Prices rose while open interest fell, suggesting some short covering. Support was seen near 311.8 and 307.7, while resistance was placed around 321.2. A sustained move above that level could point towards 326.5.
Diversified Energy Company plc (LON:DEC, NYSE:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
