Natural gas prices for the September month are staying around $4, with a favorable trend due to the expected hot weather in the United States, which will increase gas demand for electricity production.
If the temperature in the United States remains above normal, air-conditioning will result in increased electricity use.
The National Oceanic and Atmospheric Administration (NOAA) of the United States forecast above-normal temperatures for the East Coast and Midwest from August 8 to 12. Maxar also predicted on Tuesday that record temperatures could return to the Northwest from Aug. 13 to 17.
However, NG prices are projected to remain under pressure due to a reduction in export demand and US power supply. According to Bloomberg gas flows to US LNG export facilities were 10.4 bcf on Tuesday, down -4.2 percent w/w. According to the Edison Electric Institute, overall US electricity output declined -3.4 percent y/y to 89,7813 GWh in the week ending July 24. (gigawatt hours).
The domestic demand number in the United States likewise points to a downward trend in gas prices. According to Bloomberg data, consumption on Tuesday was 65.9 bcf, down -7.7% year over year.
The weekly EIA report revealed that natural gas stocks in the United States increased by 36 billion cubic feet to 2,7148 billion cubic feet in the week ending July 23, falling short of the consensus of +42 billion cubic feet. Supplies are still scarce, with inventories down -16.3 percent year over year and -5.8percent below their five-year average.
Baker Hughes stated that the number of active US natural gas drilling rigs declined by one rig to 103 in the week ending July 30. This is down from the previous week's 1-1/4 year high of 104 rigs, but still considerably above the record low of 68 rigs set in July 2020.
The net short of natural gas futures increased by 10 216 contracts to 137 758 contracts during the week, according to the CFTC Commitments of Traders report for the week ended July 27. The speculative long position lost 6532 contracts, while the short position gained 3684 contracts.
Natural gas prices are expected to find support between the 20-day and 50-day exponential moving averages of $3.88 and $3.60, respectively, while immediate resistance is projected near $4.16-$4.25.