U.S. natural gas futures gain 1% ahead of contract expiry

U.S. natural gas futures on Monday closed up about 1%, rebounding on the coming expiration of the front-month contract despite forecasts for milder weather that sent them down early in the session to their lowest since July 15.

Front-month gas futures rose 7.5 cents, or 1.1%, to settle at $6.903 per million British thermal units (mmBtu), after sliding to a session low of $6.526 on moderating temperatures, marginal increase in production and recession concerns.

“It’s kind of a rally after all that selling, all the south movement to lower prices,” said Thomas Saal, senior vice president for energy at StoneX Financial Inc.

“The contract expires on Wednesday, so you’re going to have some liquidation starting today.”

Data provider Refinitiv forecasted 76 cooling degree days (CDDs) over the next fortnight, down from their estimate of 88 CDDs on Friday. CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day’s average temperature is above 65 Fahrenheit (18 Celsius).

Hurricane Ian was expected to produce wind and storm surge impacts in western Cuba, the National Hurricane Center (NHC) said on Monday.

Ian could bring rain to the southeast United States, which could hit gas demand, Saal said, but prices should find technical support near $6.40-$6.50.

Analysts at Gelber & Associates said in a note: “Powerburn and LNG export demand has also been higher versus last year, despite the Freeport LNG export facility outage. When Freeport starts to become operational again in November, LNG export demand will likely hit record highs above 14 Bcf/d, which will mitigate additional dry gas production gains.”

The second-biggest U.S. LNG export plant was consuming about 2 bcfd of gas before it shut on June 8. Freeport expects at least partial service to resume in early to mid-November.

“Although today’s strong rebound may have offered some comfort to the bulls, we feel that it is premature to suggest that a price bottom has been achieved as we leave the door open for a further decline to about the $6.35 area,” energy consulting firm Ritterbusch and Associates said in a note.

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