U.S. natural gas prices up 1% as warmer forecasts boost power demand

(Reuters) - U.S. natural gas futures edged up about 1% on Friday on forecasts for warmer-than-normal weather in early October that should prompt power generators to burn more gas to keep air conditioners humming.

Prices were also up with exports to Mexico on track to hit a record high in September and as the amount of gas flowing to U.S. LNG export plants rises as Cheniere Energy's Sabine Pass plant in Louisiana pulls in more fuel.

Capping those gas price gains were expectations that Tropical Storm Ophelia will knock out power after it hits North Carolina and Virginia this weekend, reducing the amount of gas electric generators need to burn to keep the lights on.

Front-month gas futures for October delivery on the New York Mercantile Exchange rose 2.7 cents, or 1.0%, to settle at $2.637 per million British thermal units.

For the week, the front-month was down less than 1% after rising about 1% last week.

In a move that could reduce gas demand in the longer term, a coalition of 25 U.S. governors, called the U.S. Climate Alliance, agreed to reach 20 million electric heat pump installations by 2030 to reduce emissions from burning fossil fuels.

About 60 million, or 46%, of the nation's roughly 130 million households burn gas to heat their homes, with most of the rest coming from electricity (about 54 million households), propane (about 6 million) and heating oil (about 5 million), according to federal energy data.

Supply and demand

Financial firm LSEG said average gas output in the lower 48 U.S. states eased to 102.1 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.

In a move that could cut output in coming months, U.S. energy firms this week cut the number of oil and gas rigs operating for first time in three weeks, energy services firm Baker Hughes.

U.S. oil rigs fell by eight to 507 this week, their lowest since February 2022, while gas rigs dropped by three to 118.

Meteorologists forecast the weather in the lower 48 states would remain near normal until around Sept. 26 before turning mostly warmer than usual from Sept. 27-Oct. 7.

Traders noted that above normal temperatures in late September were still relatively mild, with averages expected to be around 72 degrees Fahrenheit (22.2 Celsius) versus a normal of 70 F for that time of year.

With milder weather coming next week, LSEG forecast U.S. gas demand, including exports, will ease from 95.0 bcfd this week to 94.0 bcfd next week before rising to 95.5 bcfd in two weeks when the weather warms again and exports increase.

The forecast for next week was higher than LSEG's outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants averaged 12.7 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.

On a daily basis, however, feedgas was only expected to reach 12.1 bcfd on Friday due to the shutdown of Berkshire Hathaway Energy's 0.8-bcfd Cove Point in Maryland for annual maintenance around Sept. 20 and a brief reduction at Cheniere's 4.5-bcfd Sabine Pass.

Pipeline exports to Mexico, meanwhile, averaged 7.2 bcfd so far in September, up from a record 7.1 bcfd in August, according to LSEG data.

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