US natural gas futures have reached a one-month high, driven by a sustained and intense heatwave across Texas and other southern and western states. This extreme weather is significantly boosting demand for gas-fired power generation, primarily for air conditioning. Houston is forecast to experience average temperatures of 100 degrees Fahrenheit from August 20-23, which is 5 degrees above the seasonal norm, contributing to record-breaking electricity demand on the Electric Reliability Council of Texas (ERCOT) grid, especially as wind generation is expected to subside.
The rally in September natural gas futures saw a 2.20% increase, with prices reaching $2.837. This surge also broke through key resistance levels, changing the main trend to upward for the first time in weeks. Analysts like Eli Rubin of EBW Analytics Group highlight that the combination of high temperatures and diminishing wind power output places a severe strain on gas-fired generators, which are crucial for meeting peak electricity demand. Production also saw a slight dip from August highs, further contributing to buyer interest.
Adding to the market dynamics, LNG feedgas deliveries to U.S. export terminals remain robust, near record levels of 17.2 to 17.7 Bcf per day. This strong export activity means less gas is available for domestic storage. While working gas in storage is still above the five-year seasonal average, early estimates for the upcoming EIA storage report suggest a smaller-than-average injection, indicating that the heat is finally significantly impacting storage builds after several heavy builds in previous weeks. The market will be closely watching the EIA report and ERCOT demand data to confirm if the heat is sufficient to keep gas burn elevated through August.
