US natural gas futures ended up 2.3 percent on Tuesday on forecasts for continued hot weather over the next two weeks, expected to keep power plant air conditioning demand high. Front-month gas futures on the New York Mercantile Exchange closed up 6.4 cents at $2.812 per million British thermal units.
The latest Global Forecast System weather model predicted the weather in the lower 48 US states would cool a bit but remain at above-normal levels over the next two weeks with 216 population-weighted cooling degree days (CDDs). That compared with Monday's forecast of 223 CDDs and a 30-year norm of 194 CDDs.
Thomson Reuters Analytics projected consumption in the lower 48 states would ease to an average of 61.6 billion cubic feet per day (bcfd) over the next two weeks. That compared with Monday's forecast of 62.2 bcfd and a 30-year norm of 57.3 bcfd.
While residential, commercial and industrial customers were using near-normal amounts of gas for the time of year, power generators burned more of the fuel because of its relatively low cost compared with coal.
Power generators were expected to use an average 33.5 bcfd of gas over the next two weeks, according to Thomson Reuters Analytics. That compares with 28.6 bcfd a year earlier and a 30-year norm of 28.8 bcfd.
The premium of gas futures over eastern coal futures climbed over $1 per mmBtu for the first time in four days. Traders however noted most generators would continue burning gas instead of eastern coal so long as the premium remained under $1.50 due to the higher environmental and transport costs for coal.
Gas production in the lower 48 states was expected to ease to 72.8 bcfd on Tuesday from 73.2 on Monday, according to Thomson Reuters Analytics. That compares with 70.9 bcfd a year ago and a record high of 74.5 bcfd in December.
Net imports from Canada were expected to ease to 5.3 bcfd on Tuesday from 5.5 bcfd on Monday, while exports to Mexico were expected to edge up to 3.2 bcfd on Tuesday from 3.1 bcfd on Monday.
In early estimates, analysts said utilities likely added 42 bcf of gas into storage during the week ending July 31.
That compared with builds of 52 bcf in the prior week, 83 bcf during the same week a year ago, and a five-year average increase of 53 bcf.