US natural gas futures rise on continued warm forecasts

US natural gas futures climbed over 2 percent on Monday on forecasts for continued above normal temperatures over the next two weeks, expected to keep power demand for air conditioning high during that time. Front-month gas futures on the New York Mercantile Exchange closed up 6.5 cents at $2.758 per million British thermal units. In technical trade, the front-month gains pushed the October contract over the 25-, 50- and 100-day moving averages for the first time since mid August and cut the premium of the November future over October to the lowest level in 14 months.
The latest Global Forecast System weather model predicted temperatures in the lower 48 US states would cool a bit but remain over normal levels for the next two weeks. Population-weighted cooling degree days were expected to ease to 112 over the next two weeks from the 116 CDD forecast Friday but remain over the 30-year norm of 98 CDDs. Thomson Reuters Analytics projected consumption in the lower 48 would average 56.6 billion cubic feet per day over the next two weeks, up from the 56.2 bcfd forecast Friday and a 30-year norm of 52.6 bcfd.
While residential, commercial and industrial customers used less gas than normal for this time of year, power generators continued to burn more of the fuel because it remains relatively cheaper than some forms of coal. Power generators were expected to use an average 27.8 bcfd of gas over the next two weeks, up from 27.7 bcfd forecast Friday. That compared with a 30-year norm of 22.4 bcfd. The gas futures premium over eastern coal held below $1 per mmBtu for a 20th day in a row, the longest since May. Traders said most generators would continue burning gas as long as the premium remains below $1.50 due to coal's higher environmental and transport costs.
Gas production in the lower 48 was expected to ease to 73.8 bcfd on Monday from 74.0 bcfd on Friday, according to Thomson Reuters Analytics. Net imports from Canada into the United States were expected to fall to 4.2 bcfd on Monday from 5.0 bcfd on Friday, while US exports to Mexico were expected to hold around 3.1 bcf.