Warmer-than-normal weather, along with lower gas prices, have encouraged power plants to burn gas at seasonal and all time records. The chart below shows 2020 (dark blue line) gas burned for power generation. Besides the seasonal lull in March-May, burn has been very strong.
The biggest mover of gas demand is temperature. In the summer, higher temperatures mean more electricity demand to run air-conditioning units. As a result, more gas is needed to generate electricity.
This July was one of the hottest on record, second all-time in at least the last 100 years. The glowing red and magenta chart on the bottom right shows the outright temperature in Fahrenheit for North America in July. The chart on the bottom left shows the anomaly to 1981-2010 climate normal, showing hotter than normal temperatures in many of the high demand regions.
August temperatures have continued much of the previous month’s heat, barring the extinguished demand caused by Tropical Storm Isaiah on the East Coast this week.
Forecast models for the 11-15 day window show continued heat for the West Coast and Northeast.
Longer-dated models from Commodity Weather Group (CWG) show September in-line with the 10-year climate average. Both of the charts below are anomalies to normal, showing warmer-than-normal temperatures that should be constructive for gas demand.
High levels of gas storage are not only here in the U.S., European gas storage has been on pace to end the injection season at all-time highs. Currently, high demand areas of Europe are experiencing above-average heat. This is a positive development; hot weather could keep European storage levels within capacity.
Two-week-out weather anomalies in Asia are also constructive for gas demand. LNG pricing markers for both Asia and Europe have been depressed due to a glut of gas supply on the water. But Asian demand may be in for a boost.
Whether in the U.S., Europe or Asia, above-average temperatures in the northern hemisphere are bullish for gas through September.