US natgas jumps over 6pc as heat keeps air conditioners cranked up

US natural gas futures jumped over 6% on Thursday, with a couple of storms brewing in the Gulf of Mexico and on forecasts for high air conditioning demand during a heat wave expected to blanket much of the country through at least early August.

Prices rose despite a federal report showing an expected near-normal storage build.

The US Energy Information Administration (EIA) said US utilities injected a near-normal 37 billion cubic feet (bcf) of gas into storage in the week ended July 17.

Front-month gas futures rose 10.4 cents, or 6.2%, to settle at $1.785 per million British thermal units, their highest close since July 10.

Tropical Depression 8 is expected to strengthen into a Tropical Storm in the Gulf of Mexico over the next day or two as it moves toward the Texas coast.

Refinitiv said production in the Lower 48 US states averaged 88.4 billion cubic feet per day (bcfd) in July, up from a 20-month low of 87.0 bcfd in June but still well below the all-time monthly high of 95.4 bcfd in November.

With the weather expected to remain hot, Refinitiv projected US demand, including exports, will hold around 92.7 bcfd this week and next. The outlook for next week was a little lower than Refinitiv's forecast on Wednesday.

"Gas has been the fuel of choice for power generators looking to meet peak demand this month, and this fuel switching has helped absorb excess gas left by (coronavirus demand) destruction in the LNG and industrial sectors," said Daniel Myers, market analyst at Gelber & Associates in Houston.

Pipeline gas flowing to US LNG export plants has averaged 3.4 bcfd (35% utilization) in July, down from a 20-month low of 4.1 bcfd in June and a record 8.7 bcfd in February.