Goldman Sachs Group Inc. (GS) reduced its estimate for U.S. end-summer natural gas inventories by 1 percent after a heatwave, while forecasting prices will remain “under pressure” as temperatures ease. A surge in demand amid the hottest July in U.S. history contributed to the bank revising its forecast for inventories at the end of the Northern Hemisphere summer to 3,770 billion cubic feet, down from an earlier outlook of 3,807, Johan Spetz and Samantha Dart, London-based analysts at the bank, wrote in an Aug. 3 report. Incremental gas demand for power generation more than doubled in July to 105 billion cubic feet from 43 billion in June, according to the bank’s estimates. Temperatures surpassed 100 degrees Fahrenheit (38 Celsius) in cities from New York to Houston in June and July, diverting more gas to plants to generate electricity for air conditioners. Natural gas futures have dropped since the middle of July after temperatures subsided and hydroelectricity generation increased, reducing the need for the fuel, the report said. Goldman said it sees a “structural oversupply” in the U.S. as a result of shale production. “We expect the underlying balance to remain soft in coming months, although less so as the transient effect of strong hydro-generation subsides,” the analysts wrote, saying they maintained a “moderately bearish” outlook for prices. The bank forecasts gas will average $4 per million British thermal units for the third quarter and $4.25 per million Btu in the October-to-December period. Natural gas futures for delivery in September traded at $4.09 per million Btu today on the New York Mercantile Exchange. The price has dropped 10 percent since July 15. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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