US natgas hits 3-week high on forecasts for warmer weather

US natural gas futures rose to their highest levels in three weeks on Wednesday as forecasts for above-normal temperatures were expected to boost cooling demand, while concerns that a storm nearing the Gulf of Mexico could affect production also provided support.

On its last day as the front-month contract, gas futures for August delivery rose 5.4 cents, or 3%, to settle at $1.854 per million British thermal units. Prices earlier touched their highest since July 7 at $1.893.

September futures, which will soon be the front month, settled up 6.6 cents at $1.930 per mmBtu.

The warmer weather seen on the East Coast of the United States is supporting prices, Raymond James analyst Muhammed Ghulam said, noting there are some concerns about the impact on offshore production due to Atlantic storms.

Although weather forecasts turned less hot from the previous day, Refinitiv data showed temperatures will remain above normal in the Lower 48 US states.

A system in the Atlantic, near Dominica, has a 90% of chance of becoming a cyclone in the next 48 hours, the US National Hurricane Center said it is latest advisory.

"There is a little bit of concern that the storm coming toward the Gulf (of Mexico) could shut down some production," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Meanwhile, weekly supply was likely to rise to 96.0 billion cubic feet per day next week, up from current week's 95.8 bcfd.

Refinitiv projected US demand, including exports, will slide from 91.4 bcfd this week to 89.1 bcfd next week.

The Federal Reserve on Wednesday repeated a pledge to use its "full range of tools" to support the US economy and keep interest rates near zero for as long as it takes to recover from the fallout from the coronavirus outbreak.

"The economic outlook - we really need to see that improve to give us a hope of better demand going forward," Flynn said.