US natural gas futures climbed about 2% to a three-week high on Thursday on forecasts calling for the weather to remain hotter than normal through mid September and a reduction in daily gas output.
Capping gains were a bigger than expected storage build and forecasts for less demand in coming weeks as cooler weather cuts air-conditioning demand.
The US Energy Information Administration (EIA) said utilities added 32 billion cubic feet (bcf) of gas into storage during the week ended Aug. 25.
US natgas prices jump high on continued hot forecasts
That was more than the 25-bcf build analysts forecast in a Reuters poll and compares with an increase of 61 bcf in the same week last year and a five-year (2018-2022) average increase of 51 bcf.
Analysts noted the amount of gas added to storage was more than expected even though power generators burned lots of gas last week to keep air conditioners humming as extreme heat blanketed the central US Utilities pulled gas from the South Central Region, which includes Texas, for a sixth straight week, the longest such streak since 2017.
Front-month gas futures for October delivery on the New York Mercantile Exchange rose 6.4 cents, or 2.3%, to $2.860 per million British thermal units (mmBtu) at 11:02 a.m. EDT (1502 GMT). The contract was on track for its highest close since Aug. 9.
The front-month price advanced into technically overbought territory with a relative strength index (RSI) above 70 for the first time since early August.
Energy traders noted that one factor limiting gas price gains was a reduction in the amount of gas power generators were burning in the US Southeast due to power outages from Hurricane Idalia.
More than 313,000 homes and businesses were still without power in Florida, Georgia and the Carolinas, a day after the storm slammed into Florida, according to data from PowerOutage.us. Those totals were down from peaks of around 288,000 outages in Florida and over 217,000 out in Georgia.
Idalia was currently a tropical storm with maximum sustained winds of 60 miles per hour (95 kph) in the Atlantic Ocean about 45 miles south-southwest of Wilmington, North Carolina, according to the US National Hurricane Center (NHC). It was heading east-northeast away from the coast and further into the ocean, the NHC said.
Texas remained hot and homes and businesses there kept their air conditioners cranked up. On Wednesday, the Electric Reliability Council of Texas (ERCOT) urged consumers to conserve energy for a sixth time in the past seven days, due in part to “a high level of unexpected thermal generation outages and forecasted low wind generation.”
For Thursday, ERCOT forecast the power situation would be less tight than over the past week with supplies expected to exceed demand by almost 5,000 megawatts (MW) after the sun goes down and solar power stops working at around 8 p.m. local time. Earlier in the week, demand was expected to exceed supplies by around 800 MW at around 8 p.m. on Tuesday before a call for conservation.
Extreme heat boosts the amount of gas burned to produce power for cooling, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.
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