HomeNewsNatural Gas Futures Climb 2% as Heat Wave Boosts Demand

Natural Gas Futures Climb 2% as Heat Wave Boosts Demand

7/2/2025

(Reuters) — U.S. natural gas futures rose over 2% on July 2, snapping two days of declines, as hotter mid-July forecasts are expected to lift air-conditioning demand, prompting power generators to burn more gas.

Front-month gas futures for August delivery on the New York Mercantile Exchange (NYMEX) settled 7.3 cents, or 2.1%, higher at $3.49 per million British thermal units (MMBtu).

"We're starting to see some heat coming onto the maps for the middle of July, and that's bringing some support back into the natural gas markets," said Gary Cunningham, director of market research at Tradition Energy.

"We're also seeing all of the LNG terminals come out of maintenance, and that just creates fundamental support from a base perspective."

Traders will watch how contracts for winter months, particularly January, respond after the U.S. Energy Information Administration's weekly storage report due on Thursday, Cunningham said.

A smaller-than-expected injection in the low 40s could push the January futures contract toward the $5 level, with winter demand posing the biggest upside risk, he added.

Supply and Demand

Financial firm LSEG said average gas output in the Lower 48 U.S. states has eased to 106.2 billion cubic feet per day so far in July, slightly down from 106.4 Bcf/d in June, when spring pipeline maintenance had temporarily curbed production.

LSEG estimated 206 total degree days over the next two weeks, compared with 182 estimated on Tuesday. It also forecast average gas demand in the Lower 48, including exports, increased to 106.1 billion cubic feet per day for the current week from 103.7 Bcf/d in the prior week.

Normal for this time of year is 172 TDDs. Total degree days measure the number of degrees a day's average temperature is above or below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to cool or heat homes and businesses.

The average amount of gas flowing to the eight big U.S. LNG export plants fell to 14.4 Bcf/d in June, down from 15.0 Bcf/d in May and a monthly record high of 16.0 Bcf/d in April.

Meanwhile, Russia's exports of liquefied natural gas in the first half of the year declined by 4.4% from a year earlier to 15.2 million metric tons, LSEG preliminary data showed on Wednesday, amid international sanctions over Ukraine.

In particular, the U.S. has imposed sanctions on companies and vessels tied to Russia's new Arctic LNG 2 project because of the conflict in Ukraine, effectively freezing it due to difficulties for Moscow in securing buyers.

President Donald Trump has urged the European Union to buy more U.S. LNG and pledged to boost supply.

"The summer has just started and there still are quite a bit of uncertainties about the summer heat and tropical storm development," said Zhen Zhu, managing consultant at C.H. Guernsey and Company in Oklahoma City.

Hurricanes are a double-edged sword for gas markets. They can drive prices up by cutting offshore production, even if just 2% comes from federal Gulf waters, but just as easily drag them down by knocking out LNG export terminals or slashing demand during widespread power outages. Some storms hit both sides of the equation.

"Any Gulf of Mexico tropical activity would have to thread a needle to avoid LNG facilities that are located roughly every 200 miles between Corpus and Plaquemines," BofA Global Research said in a note.

"Tropical disruptions to LNG exports would likely be bearish for domestic U.S. natural gas markets but bullish for global gas markets."

Dutch and British wholesale gas prices rose on Wednesday morning, rebounding from falls earlier in the week.

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