US natural gas futures settled 1 percent higher on Tuesday, helped for a second straight day by stronger crude oil prices that offset bearish weather forecasts expected to temper demand for air conditioning. Front-month gas futures for September delivery on the New York Mercantile Exchange rose 2.7 cents, or 1.0 percent, to settle at $2.617 per million British thermal units.
The session high was $2.62 per mmBtu, while the low was $2.58. Activity was limited with prices hovering at the $2.60 levels, said Kent Bayazitoglu, director of market analytics at energy consulting firm Gelber & Associates in Houston. He added that the market was experiencing a slight upswing though after plumbing nine-week lows last week. Oil prices settled up nearly 2 percent on Tuesday, hitting five-week highs for a second straight day as sources at Opec spoke of Saudi Arabia's apparent desire for higher crude prices while Russia met the producer group to discuss the market.
Natural gas advanced partially in sympathy with stronger oil prices after forecasts for milder temperatures, Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates said in a note. He added that buying interest was constrained by cooler temperature trends that were beginning to stretch toward the end of August. Such weather usually translates to reduced need for air conditioning, meaning also less burning of gas for power consumption.
Traders in natural gas also factored in monthly output estimates from the US Energy Information Administration due on Thursday. The EIA expects a seventh consecutive month of production declines in September, forecasting an average output of 45.4 billion cubic feet per day (bcfd), the lowest level since May 2015. Despite weeks of smaller-than-normal additions since April, analysts expect gas stockpiles to start the winter heating season in November at an all-time high as utilities left record amounts of the fuel in storage after the mild 2015-2016 winter.