Gas prices in the United States remain restrained below the mid-$2 mark as weather predictions indicate a potential drop in August temperatures compared to July. This development has dashed the hopes of gas longs who were expecting high temperatures this month to extend into late summer, leading to increased power burns due to higher air-conditioning demand.
The situation is exacerbated by a significant surge in gas production, exceeding one billion cubic feet (bcf) daily. This surge has been a challenge for gas bulls who were banking on higher power burns and a spike in liquefied natural gas (LNG) demand to drive the market to the $3 territory.
Houston-based energy markets advisory firm, Gelber & Associates, noted, “Production rebounded +1.2 bcf/d, which is unusually high compared to what has been previously observed for this time of week during the current maintenance season.”
Adding to the bearish sentiment is the revision of forecasts across the Lower 48 states, suggesting that the high summer demand experienced so far may taper off earlier than expected.
In the latest trading session, the September gas contract on the New York Mercantile Exchange’s Henry Hub settled at $2.59 per mmBtu, down 9.8 cents, or 3.6%, for the day. This week’s market performance shows a potential loss of 3%, following the 2% decline from the previous week.
Throughout this year, gas prices have remained confined to the mid-$2 range. While they briefly reached around $2.90 in late June, this upward momentum was short-lived, with prices fluctuating between $2.50 to sub-$2.80 since then.
Despite the U.S. Energy Information Administration (EIA) reporting a smaller-than-expected increase in natural gas storage levels last week, the market failed to rally. The storage levels rose by 16 bcf, compared to forecasts for a 19-bcf build. The increase was notably smaller than the 41-bcf build recorded during the previous week.
The current stock gain brings the total gas held in inventory across the United States to 2.987 tcf, marking a 23.7% increase from the same week last year and approximately 13.1% above the five-year average.
The struggle to break beyond $2.60 continues for gas bulls, as cooling forecasts and ample production weigh on U.S. natural gas prices.
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