U.S. natural gas futures rise to one-week high on hot forecasts

U.S. natural gas futures rose over 2pc to a one-week high on Monday on forecasts for hot weather and high air conditioning demand to continue into early September.

Traders also noted a near 6pc increase in oil futures helped push gas prices higher. Oil recovered from a seven-day losing streak due to a weaker dollar and strength in global equities markets.

Front-month gas futures rose 9.4 cents, or 2.4pc, to settle at $3.945 per million British thermal units (mmBtu), their highest close since Aug. 16.

Last week, gas speculators followed a 9pc drop in crude futures and boosted their short positions in natural gas futures and options on the New York Mercantile Exchange (NYMEX) to the highest since June 2020.

That increase in shorts drove speculative open interest in overall NYMEX gas positions to their highest since March 2020.

US natgas futures rebound as forecasts turn slightly warmer

It also caused the speculative net long position on the NYMEX and Intercontinental Exchange to drop by the most in a week since March 2021 to its lowest since June 2021, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report on Friday.

In the power market, the Electric Reliability Council of Texas (ERCOT), grid operator for most of the state, projected hot weather this week would push peak demand over the grid's all-time high of 74,820 MW set in August 2019.

Data provider Refinitiv said gas output in the U.S. Lower 48 states rose to an average of 92.1 billion cubic feet per day (bcfd) so far in August from 91.6 bcfd in July. That compares with an all-time monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average U.S. gas demand, including exports, would ease from 94.3 bcfd this week to 93.6 bcfd next week as a seasonal cooling of the weather reduces air conditioning demand and causes power generators to burn less fuel. The forecast for next week, however, was higher than Refinitiv projected on Friday.

The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants slipped from an average of 10.8 bcfd in July to 10.5 bcfd so far in August, due mostly to reductions at the Cameron and Sabine plants in Louisiana. That compares with a record 11.5 bcfd in April.

But with European and Asian gas both trading around $15 per mmBtu, compared with just $4 for the U.S. fuel, analysts said buyers around the world would keep purchasing all the LNG the United States can produce.

U.S. pipeline exports to Mexico have slipped to an average of 6.1 bcfd so far in August from 6.6 bcfd in July and a record 6.7 bcfd in June.