US natural gas futures fall on weaker oil, milder weather forecasts

NEW YORK: US natural gas futures fell over 3percent on Tuesday, retreating from a one-week high hit in the previous session, pressured by weaker oil prices and forecasts for milder weather and lower demand in the coming weeks than previously expected. Front-month gas futures for September delivery on the New York Mercantile Exchange (NYMEX) fell 9 cents, or 3.2percent, to USD2.691 per million British thermal units (mmBtu).

Oil prices fell by around 4percent to a three-week low after comments by Qatar and US Treasury Secretary Scott Bessent raised hopes for a diplomatic resolution to the Middle East conflict, which would improve oil flows through the Strait of Hormuz.

Bessent said on Tuesday a deal with Iran to reopen the Strait of Hormuz could come as soon as Tuesday or Wednesday, while Qatar Foreign Ministry spokesperson Majed Al Ansari said efforts to secure a diplomatic resolution to the conflict were continuing.

Meteorologists forecast milder weather than previously expected nationwide in the coming weeks, as Cooling Degree Days fell to 187 on Tuesday from 246 on Monday. CDDs measure energy demand to cool buildings. “The weather forecast cooled off just when the bulls needed them most. So it looks like we’re going to see some moderating temperatures according to some forecasters, and that is putting the market under pressure,” said Phil Flynn, senior analyst for Price Futures Group.

Financial firm LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 112.1 bcfd this week to 114.2 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.

Record output and mild spring weather so far this year have allowed energy firms to keep the amount of gas in inventory higher than the five-year (2021-2025) average since March.

Analysts projected the amount of gas in storage would rise to 6.6percent above normal during the week ended July 31, up from 6.4percent above normal during the previous week.

Gas inventories have remained in surplus despite weeks of above-normal temperatures so far this summer.

“The market is moving into the later stage of the cooling cycle that will be forcing the gas market to look ahead to the low-demand shoulder period where the market will become increasingly reliant upon supply disruptions within the Gulf of Mexico with the approach of the active peak hurricane season,” consultancy Ritterbusch & Associates said in a note.

LSEG said average gas output in the US Lower 48 states has held at 110.7 billion cubic feet per day (bcfd) so far in August, matching the monthly record high set in July. Average gas flows to the nine big US LNG export plants have fallen to 16.9 bcfd so far in August due in part to maintenance at several facilities, including Freeport LNG’s 2.4-bcfd plant in Texas. That figure is down from an average of 17.2 bcfd in July and a monthly record high of 18.8 bcfd in April.