US natural gas futures rise as hotter weather boosts power demand

U.S. natural gas futures rose as forecasts pointed to hotter weather in the coming weeks, raising expectations for increased gas demand from power generators as consumers use more air conditioning.

The Electric Reliability Council of Texas (ERCOT), the state’s largest power grid operator, expects daily peak electricity demand from August 21 through August 25 to exceed the all-time record set in July, Bloomberg reports. 

The heat, combined with new pipeline capacity in West Texas, has also pushed up day-ahead prices at the Waha gas hub in the Permian Basin by reducing supplies available within the region. Waha prices have averaged more than $2 per million British thermal units so far this week.

At the same time, increased gas flows from the Permian Basin into East Texas are putting downward pressure on prices at the U.S. benchmark Henry Hub in southern Louisiana.

Despite regional differences, the broader trend in the U.S. gas market remains upward. Weather forecasts indicate that above-average temperatures could persist through at least September 4.

U.S. gas production remains stable, while exports to Mexico and shipments to liquefied natural gas plants have shown only limited fluctuations.

By Sabina Mammadli