US natural gas futures rose, marking their largest increase in over two months, as an unexpected shift in weather forecasts predicted much hotter conditions for the coming weeks, particularly across the central and southern US. This hot weather outlook prompted a wave of short-covering among money managers who had previously held their most bearish positions on gas since 2020.
The surge in prices was also supported by expectations of increased natural gas demand from electricity providers for air conditioning. Record high temperatures were anticipated across the Southwest through the weekend, and Commodity Weather Group forecasted above-average temperatures for nearly the entire US from September 1-10. This outlook significantly boosted market sentiment.
Furthermore, a smaller-than-expected build in weekly US natural gas storage contributed to the price hike. The EIA reported a +15 bcf increase in inventories for the week ended August 21, which was below the five-year average for that week of +33 bcf. As of August 21, inventories were +5.5% above their five-year seasonal average, indicating adequate but tightening supplies compared to expectations.
