Nat-Gas Prices Soar on Hot Weather Forecasts and Tight European Supplies

Nat-gas prices surged on Monday after forecasts indicated hotter US weather, potentially increasing demand for electricity to power air conditioning use. The Commodity Weather Group reported a shift in temperature projections, showing much hotter weather in the central and southern US over the coming weeks.

The price increase was also influenced by European nat-gas prices, which surged 11% on Monday to a two-week high due to uncertainty surrounding the Strait of Hormuz. This has kept European nat-gas supplies tight, boosting demand for US nat-gas supplies.

Last week, nat-gas prices dropped to a three-and-a-half-month low due to a larger-than-expected storage build, which pushed nat-gas inventories above their five-year seasonal average. However, the recent price increase may be short-lived as speculation about an El Niño weather system bringing warmer temperatures to the Northern Hemisphere this fall and winter reduces nat-gas heating demand.

US dry gas production increased by 2.9% year-over-year to 113.1 billion cubic feet per day (bcf/day), while lower-48 state gas demand rose by 9.2% y/y to 84.1 bcf/day. Estimated LNG net flows to US LNG export terminals were also up, at 18.7 bcf/day (+6.9% week-over-week).