US natgas futures hold steady on outlook for near-normal weather

US natural gas futures were little changed on Tuesday amid forecasts for near-normal temperatures going into the home stretch of summer.

Front-month gas futures for September delivery on the New York Mercantile Exchange (NYMEX) remained unchanged at $2.210 per million British thermal units as of 10:24 a.m. EDT (1424 GMT).

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.

Refinitiv data showed that in the Lower 48 US states gas production rose to an all-time high of 92.5 bcfd on Monday.

Output hit a record high even though a section of Enbridge Inc's Texas Eastern pipeline remained shut in Kentucky after an explosion on Aug. 1 that killed one person. The company said it planned to restore service on one of the three lines near the blast site from Aug. 24 to 26.

The 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.

"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.

"Although there could be some shifts in the short-term temperature views or possibly some distant storm threats, we are not viewing the weather factor as sufficient to sustain much upside follow-through at this late stage of the cooling cycle."

Analysts said gas futures had traded near multiyear 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 Oct. 31.

Refinitiv data projected demand in the Lower 48 would fall to 88.9 bcfd next week from 91.6 bcfd this week.

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.

On the other hand, spot power prices <EL-PK-ERTN-SNL> in Texas were at $400 per megawatt hour. On Friday, it rose to a record high of $751 as the state's grid operator took emergency measures for a second time in a week to keep the lights on as consumers cranked up their air conditioners to battle a heat wave.

Meanwhile, ABN Amro slashed its average Henry Hub price forecast to $2.50 per million British thermal units from $3.25 for 2019, 2020 and 2021, citing "pressure from market positioning, rather than fundamental drivers" such as higher gas output.

US Commodity Futures Trading Commission (CFTC) said on Friday that speculators in four major NYMEX, Intercontinental Exchange (ICE) markets increased net short position by 12,466 contracts to 238,996 in week to Aug. 13.