US natural gas prices jump 3% on hotter weather and LNG export surge

US natural gas futures surged about 3% on Monday, reaching their highest level in a week. This jump was driven by forecasts of hotter weather over the next two weeks and a rise in liquefied natural gas (LNG) exports.

Despite record-high production levels and expectations of lower demand, the market reacted strongly to weather projections and export activity. Front-month gas futures for August delivery climbed to $3.414 per million British thermal units.

What impact will hotter weather have on natural gas demand?

Meteorologists predict that temperatures across the lower 48 states will remain mostly warmer than normal through at least July 29. This hotter weather typically increases demand for cooling, boosting natural gas consumption for electricity generation.

However, some forecasts have slightly reduced the expected heat for this week. Still, the overall trend points to sustained elevated temperatures that may support higher gas prices.

Did you know?
Did you know that only about 2% of US natural gas production comes from the offshore Gulf of Mexico, limiting the impact of tropical storms on overall supply?

How are LNG exports influencing US gas prices?

Flows of gas to LNG export plants have increased in July, rising to 15.8 billion cubic feet per day from 14.3 bcfd in June. This rise follows the end of maintenance and outage periods at several liquefaction units.

Daily LNG export feedgas reached a three-month high of 16.6 bcfd recently, with the Venture Global LNG Plaquemines plant in Louisiana hitting a record 2.9 bcfd. Higher exports reduce domestic supply, putting upward pressure on prices.

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Natural gas production hits record highs in July

US gas production remains robust, with average output in the Lower 48 states reaching 106.8 billion cubic feet per day so far in July. This surpasses the previous monthly record set in June.

The strong production levels mean that despite increased demand and exports, storage levels are still about 6% above the five-year normal and are expected to grow in the near term.

Gulf storm risks add volatility to energy markets

The National Hurricane Center has noted a 30% chance of a tropical storm developing in the Gulf of Mexico. While storms can disrupt production, only about 2% of US gas output comes from offshore Gulf facilities.

Storms can also reduce demand by knocking out power to homes and businesses, particularly if LNG export plants are affected, adding complexity to market dynamics.

Looking ahead, the interplay of weather patterns, export growth, and production levels will continue to shape natural gas prices. Market watchers will be closely monitoring these factors for signs of further volatility or stabilization.