Hot weather boosts refrigeration demand, US natural gas futures rose slightly, LNG export demand rose to the highest level since the end of June

The Zhitong Finance App learned that US gas futures rose slightly on Monday. Recent weather forecasts show that most cities on the southern, eastern, and east coasts of the US will experience hot weather in the next few days, and demand for air conditioning and refrigeration is expected to rise, thereby increasing the power industry's demand for natural gas. Meanwhile, the Freeport LNG facility in Texas resumed operations after maintenance was completed, driving demand for raw gas from US liquefied natural gas (LNG) export terminals to the highest level since the end of June. However, US gas production is still close to this year's record high, limiting the room for further increases in futures prices.

As of 10:37 p.m. Beijing time, US natural gas futures for October delivery on the New York Mercantile Exchange rose 0.7 cents, or about 0.2%, to 2.895 US dollars/million British thermal units (mmBTU).

NatgasWeather.com's latest weather forecast shows that between August 31 and September 5, most cities on the southern, eastern, and east coasts of the United States may experience high temperatures of more than 100 degrees Fahrenheit. Continued high temperatures usually drive residents and businesses to increase the use of air conditioning, thereby increasing electricity demand. Since natural gas is one of the important fuels in the US power generation industry, rising electricity loads usually drive an increase in natural gas consumption.

However, there is still some uncertainty about the extent to which weather factors support natural gas demand. One of the latest predictions reduced cooling degrees (CDD) by 11 days compared to the previous one. The cooling degree day is mainly used to measure the extent and duration of the temperature above a specific benchmark level. It is an important indicator for the energy market to assess the demand for air conditioning and refrigeration. The predicted decline in cooling levels on a daily basis means that although the weather will still be hot in the future, potential cooling demand may be lower than previously anticipated.

In addition to weather factors, the recovery in US LNG export demand also supports natural gas prices. The Freeport LNG facility in Texas completed maintenance and resumed operations last week, increasing demand for feedstock gas at the LNG export facility.

According to the data, the US LNG export terminal is expected to receive about 19.6 billion cubic feet/day of natural gas on Monday, an increase of 15.8% over the previous week, driving the demand for natural gas related to US LNG exports to the highest level since the end of June.

The resumption of operation of LNG export facilities means that more natural gas in the US needs to be transported to liquefaction terminals for processing and exported overseas. Therefore, the supply of natural gas that can be used in the US domestic market will usually be reduced, forming a certain support for natural gas prices. Meanwhile, US gas exports to Mexico on Monday are expected to be around 7.9 billion cubic feet/day, down 1.7% from the previous week.

Despite the favorable effects of hot weather and the recovery in demand for LNG exports, strong US gas production is still an important factor in suppressing rising prices. According to the data, dry natural gas production in the 48 states of the United States is expected to reach about 114.6 billion cubic feet/day on Monday, an increase of 5.9% over the previous year. Over the weekend, natural gas production has risen to a level close to this year's record high.

Continued high supply means that even if demand for power generation and LNG exports increases, the US market still has sufficient natural gas supply, thereby limiting the room for futures prices to rise.

On the demand side, the total demand for natural gas in the 48 states of the US is expected to be about 78.4 billion cubic feet/day on Monday, a sharp increase of 17.8% over the previous year.

As a result, the US gas market is currently showing a clear supply and demand game. On the one hand, hot weather may boost demand for air conditioning and power generation in the next few days, while the end of maintenance of Freeport LNG will push demand for LNG feedstock gas to the highest level since the end of June; on the other hand, US natural gas production reached about 114.6 billion cubic feet per day and is close to a record high during the year, and sufficient supply will continue to limit the room for rising prices.

U.S. gas futures rose only slightly on Monday due to a combination of long and short factors. Next, whether the weather forecast will heat up further, whether demand for LNG export terminals will remain high, and whether US natural gas production continues to set new records will be important factors affecting the trend of natural gas prices.