Natural gas futures ended last week at $2.773 per MMBtu, marking a second consecutive weekly advance. Prices moved higher again in early Monday trading to around $2.83 as updated weather forecasts pointed to above-average temperatures across parts of the southern, central and western United States into early September.
The hotter outlook is directly supporting gas demand. Higher temperatures increase air-conditioning use and electricity consumption, which raises demand from gas-fired power generation. Strong power loads, particularly in markets such as Texas and the interior West, are extending summer demand at a point when consumption would normally be expected to begin easing.
Storage data are also becoming more supportive. Recent injections into US inventories have been smaller than normal as stronger power-sector demand absorbs more supply. Storage levels remain comfortable, but slower injections reduce the risk of excessive inventory accumulation ahead of autumn.
Liquefied natural gas demand is another increasingly important factor. Maintenance at major US export facilities has limited feedgas consumption during the summer, leaving more natural gas in the domestic market. As maintenance concludes, LNG facilities are expected to increase gas intake.
Higher feedgas demand would absorb more domestic production at the same time that summer cooling demand begins to fade. This creates a clearer route towards tighter supply conditions heading into the autumn.
International demand remains supportive as well. European storage levels are below multi-year seasonal norms, reinforcing the importance of US LNG supply and supporting continued utilisation of American export capacity as facilities return from maintenance.
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.
