US Natural Gas Prices Surge Amid Record-Breaking Heat

US natural gas prices rose on August 24, as forecasts indicated record-breaking heat and lower output. Forecasts shifted hotter over the weekend, suggesting higher demand for power-plant fuel as consumers turn up their air conditioning use.

The month of August is now on track to eclipse 2007 for the hottest population-weighted August on record, according to Commodity Weather Group. This increase in heat will likely drive up natural gas demand and contribute to higher prices.

Output also fell over the weekend, led by declines in the Appalachian production region due to uneconomic prices for short-term delivery. The Tetco M-2 Receipts index, a key indicator for Appalachia gas prices, dropped to $1.61 per million British thermal units on Friday, a 50% decrease from June and July levels.

This decrease in output is likely to exacerbate the upward pressure on natural gas prices as demand increases with the heat. The combination of higher demand and lower supply will drive up prices for US natural gas.