US natural gas futures edged up to a five-week high on Tuesday on forecasts for a little hotter weather and a bit more cooling demand over the next two weeks than previously expected.
Front-month gas futures for August delivery on the New York Mercantile Exchange (NYMEX) rose 2.2 cents, or 0.9pc, to settle at $2.425 per million British thermal units (mmBtu), their highest close since May 31.
With the weather heating up, data provider Refinitiv projected demand would rise to 91.1 billion cubic feet per day (bcfd) next week from 89.3 bcfd this week.
That is a little higher than its forecasts on Monday of 90.7 bcfd for next week and 89.2 bcfd this week because power generators are expected to burn a bit more gas over the next two weeks to meet higher air conditioning usage.
Traders, however, noted the likely formation of a tropical depression in the Gulf of Mexico over the next 48 hours could reduce demand along the Gulf Coast.
The National Hurricane Center said there was an 80pc chance a low pressure system in the northeast Gulf of Mexico near Florida could strengthen into a tropical depression over the next few days as it moves toward Texas.
That storm would pass close to three of the nation's four operating liquefied natural gas export (LNG) terminals - Sempra Energy's Cameron in Louisiana and Cheniere Energy Inc's Sabine Pass in Louisiana and Corpus Christi in Texas.
The amount of gas flowing to LNG export terminals was expected to rise to a record high of 6.3 bcfd on Tuesday, according to Refinitiv data.
Refinitiv projected LNG exports would keep hitting fresh highs in coming weeks as new units enter service at several terminals, including Cheniere's Corpus Christi, Sempra's Cameron, Freeport LNG's Freeport in Texas and Kinder Morgan Inc's Elba in Georgia.
Traders said a recent increase in gas prices in Europe over the past couple of weeks has ended talk for now that some LNG buyers might reject US cargoes even though prices remain near multi-year lows in Asia.
Gas speculators, meanwhile, boosted their net short positions last week on the NYMEX and Intercontinental Exchange to the highest since November 2015, according to data from the US Commodity Futures Trading Commission (CFTC), with net longs on the NYMEX falling to their lowest since December 2011.
Traders said gas futures have mostly traded close to multi-year lows since the end of May as near-record production and moderate weather allowed utilities to inject huge amounts of gas into stockpiles, shrinking a massive storage deficit and removing any concerns about shortages next winter.
The amount of gas in storage has remained below the five-year average since September 2017.
It peaked at 33pc under the five-year average in March 2019. Analysts, however, forecast inventories will reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season at the end of October.
Analysts said utilities likely added 67 billion cubic feet (bcf) of gas to inventories during the week ended July 5.
That compares with an increase of 76 bcf during the same week last year and a five-year (2014-18) average increase of 70 bcf for the period.
If correct, it would be the first time this year the storage increase is smaller than the five-year average and would boost stockpiles to 2.457 tcf.
That would be 6.0pc below the five-year average of 2.613 tcf for this time of year.
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