Natural gas continues to climb supported by warm weather and increased demand for electricity
Natural gas prices continued to rise for the fourth consecutive session, recording their highest levels in a week and a half, supported by forecasts of a severe heatwave in the United States, which is expected to push electricity companies to increase gas consumption to meet rising demand for cooling homes and buildings.
Hot weather boosts natural gas demand
Weather forecasts indicate that temperatures will remain above seasonal averages until late July, which increases the use of air conditioners, and therefore the demand for natural gas as the main fuel for electricity generation rises.
Electricity production in the United States for the week ending July 5 increased by 1.0% compared to last year, reflecting an increase in consumption.
Liquefied natural gas (LNG) exports also contributed to supporting prices, as they approached record levels, although flows to export facilities remained below their peak recorded last April.
Oversupply may limit the rise
Despite the rise in prices, analysts predict that energy companies will continue to pump large volumes of gas into warehouses over the coming weeks, especially after domestic production reached record levels in June, with expectations of exceeding them in July.
The weekly report of the Energy Information Administration (EIA) was optimistic for prices, as it showed that natural gas inventories increased by 53 billion cubic feet for the week ended July 4, which is lower than analysts ' expectations (61 billion cubic feet), and matched the five-year average in this period.
Future forecast: between strong demand and high production
We expect natural gas to trade on an uptrend, as with the continuation of hot weather, demand for natural gas is expected to remain strong, especially as the United States enters the peak of the cooling season.
However, record production and increased gas pumping in warehouses may limit the pace of ascent, which puts the market in a state of balance between rising and falling factors during the coming period.
It is noteworthy that natural gas remains one of the most important energy sources globally, and its price movements significantly affect the industrial and electricity sectors, making it an important indicator to follow the transformations of energy markets.
