Natural Gas Futures Hold Near $2.71 as Heat Boosts Power Demand

Above-normal temperatures across the U.S. are expected to keep power-sector demand for natural gas elevated into next week.

U.S. natural gas futures edged higher in early trading Monday, with above-normal temperatures across much of the country expected to support power-sector demand into next week.

"The warmer forecast is giving the market a near-term bid, though the storage surplus keeps a lid on any sustained rally," said Dennis Kissler, senior vice president at BOK Financial.

Nymex natural gas traded near $2.71 per million British thermal units after settling 0.4% lower Thursday. U.S. inventories rose 28 billion cubic feet to 3,084 Bcf in the week ended July 24, below the 37 Bcf consensus, while LNG feedgas demand held just above 18 Bcf a day.

The build still leaves storage above the five-year average, capping upside even as heat-driven cooling demand lifts burn. Traders will watch the EIA's weekly inventory report Thursday for signs the surplus is narrowing.

The weather-driven bid comes as the market weighs a storage surplus against firm liquefied natural gas export demand. Inventories stood at 3,084 Bcf in the week ended July 24 after a 28 Bcf build that fell short of the 37 Bcf analysts expected, according to the Energy Information Administration. The shortfall pointed to tighter-than-expected supply, though futures still slipped 0.4% to settle at $2.71 per MMBtu that day as demand concerns offset the inventory miss.

LNG feedgas demand has held just above 18 Bcf a day, providing a floor under prices even as domestic storage runs above seasonal norms. The last time inventories carried a comparable surplus into August, front-month prices traded in a narrow band through the shoulder season before firming as winter withdrawal forecasts emerged.

The broader energy complex remains in focus after oil prices swung on geopolitical headlines. Brent crude traded near $90 a barrel after U.S. strikes against Iranian targets, while WTI crude fell 6.17% to $79.45 a barrel Aug. 3 after President Trump canceled a planned military strike on Iran. The pullback in crude removed some of the risk premium that had spilled into natural gas, though the two fuels respond to different supply and demand drivers.

For natural gas, the immediate question is whether the heat persists. Above-normal temperatures are forecast across the central and eastern U.S. into next week, which would keep air-conditioning demand elevated and draw down storage. The EIA's weekly inventory report Thursday will show whether the surplus over the five-year average is narrowing.

If the heat holds and LNG exports stay near record levels, prices could push toward the upper end of their recent range. If forecasts cool, the storage surplus reasserts itself and futures drift back toward the low $2.60s. Either way, the market is likely to stay range-bound until the first signs of winter demand emerge in the fall.

This article is for informational purposes only and does not constitute investment advice.