US natural gas futures rose for a second straight session on Tuesday as gas demand rose amid above-normal temperatures, but a surge in production to all-time highs and forecasts for moderating weather limited gains. Front-month gas futures on the New York Mercantile Exchange rose 0.8 cents, 0.4%, to settle at $2.218 per million British thermal units.
Forecasts indicate a turn to more normal temperatures, said Thomas Saal, senior vice president of energy at INTL FCStone. "The market is waiting for this week's storage numbers. Prices have been trading between $2 and $2.50 and that's probably where we'll be until we get new information," he added. The US Energy Information Administration will release its weekly storage report at 10:30 a.m. EDT (1430 GMT) on Thursday.
Gas production in the Lower 48 US states rose to an all-time high of 92.5 bcfd on Monday, Refinitiv data showed. "This market has moved into a trading lull as it is finding it is having difficulty maintaining momentum from either the up or the down side," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
"We still anticipate fresh three-year lows and we are not ruling out a brief drop to below the $2 mark should September temperature patterns prove unusually mild." Refinitiv data also indicated 190 cooling degree days (CDDs) in the Lower 48 states over the next two weeks. The normal is 170 CDDs for this time of year.
CDDs measure the number of degrees a day's average temperature is above 65 degrees Fahrenheit (18 degrees Celsius) and are used to estimate demand to cool homes and businesses. Analysts said gas futures had traded near multi-year lows since May because record production and mild spring weather allowed utilities to inject huge amounts of gas into storage, shrinking a massive inventory deficit and removing concerns about shortages this winter even though power demand and liquefied natural gas (LNG) exports are on track to hit all-time highs.
The amount of gas in inventory has remained below the five-year average, however, since September 2017. It fell as low as 33% below that average in March 2019. But with production expected to keep growing, analysts said, stockpiles should reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season on October 31. Exports to Mexico were at 5.3 bcfd, their highest since June, according to Refinitiv data. That compared with a daily record high of 5.5 bcfd in January.
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