U.S. natural gas futures climbed about 2% on Thursday on a smaller-than-expected weekly storage build last week and forecasts for higher demand over the next two weeks than previously expected.
In addition, traders noted prices were up on forecasts for hotter-than-normal weather to continue through mid-July and as the amount of gas flowing to liquefied natural gas (LNG) export plants increases after maintenance work.
In Texas, power use set a new record on Tuesday and was expected to break that all-time high on Thursday as a heat wave continues to bake the state, according to preliminary data from the state's grid operator, the Electric Reliability Council of Texas (ERCOT).
Extreme heat boosts the amount of gas generators burn to produce power for air conditioning, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state's power came from gas-fired plants, with most of the rest from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
The U.S. Energy Information Administration (EIA) said utilities added 76 billion cubic feet (bcf) of gas into storage during the week ended June 23.
That was lower than the 82-bcf build analysts forecast and compared with an increase of 81 bcf in the same week last year and a five-year (2018-2022) average increase of 80 bcf.
In Appalachia, the U.S. Federal Energy Regulatory Commission (FERC) approved the restart of construction of the long-delayed $6.6 billion Mountain Valley natural gas pipeline from West Virginia to Virginia.
The companies building the pipe expect to complete the project by the end of 2023, freeing up more gas supplies in Appalachia, the nation's biggest shale gas region.
On its first day as the front-month, gas futures for August delivery on the New York Mercantile Exchange rose 5.5 cents, or 2.1%, from where the August contract closed on Wednesday to $2.723 per million British thermal units at 10:32 a.m. EDT (1432 GMT) on Thursday.
That, however, was up about 5% from where the July contract closed when it was still the front-month on Wednesday.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell to 101.5 billion cubic feet per day (bcfd) so far in June from a record 102.5 bcfd in May.
Meteorologists forecast that the weather in the Lower 48 states would remain hotter than normal through at least July 14.
With hotter weather coming, Refinitiv forecast that U.S. gas demand, including exports, would rise from 98.0 bcfd this week to 104.2 bcfd next week. Those forecasts were higher than Refinitiv's outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.5 bcfd so far in June from 13.0 bcfd in May. That is well below the monthly record high of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc's Sabine Pass in Louisiana and Corpus Christi in Texas.
On a daily basis, however, total feedgas to the seven LNG export facilities rose to a four-week high of 12.8 bcfd on Wednesday as the amount of gas flowing to Sabine jumped about 2 bcfd over the past week to around 4.2 bcfd. That compares with average feedgas to Sabine of 4.5 bcfd so far this year and 4.5 bcfd in all of 2022.