U.S. natural gas futures rallied several cents Tuesday, aided by an uptick in anticipated weather-driven demand and a dip in daily production estimates. Spot prices, meanwhile, were mixed; the NGI Spot Gas National Avg. added 0.5 cents to $2.305/MMBtu.

The June Nymex futures contract rallied 3.8 cents to settle at $2.659 after going as high as $2.670. Further along the strip, July settled 3.6 cents higher at $2.689, while August settled at $2.705, up 3.4 cents.

Genscape Inc. reported a “hefty day/day drop” of more than 2.7 Bcf/d in its latest U.S. Lower 48 production estimate early Tuesday, which the firm attributed to “widespread shoulder season maintenance events.”

Tuesday’s estimate was subject to revision, and recent daily revisions have exceeded 1 Bcf/d, noted Genscape senior natural gas analyst Rick Margolin. Still, the drop in Tuesday’s data “pulls the month-to-date average down below 87.6 Bcf/d, about 0.5 Bcf/d behind our forecast for May.”

Looking ahead to this week’s Energy Information Administration storage report, Energy Aspects issued a preliminary estimate for a return to a triple-digit injection, calling for a 106 Bcf build. The estimate showed fundamentals “essentially flat across the ledger week/week except for residential/commercial demand, which falls by nearly 3 Bcf/d and drives a return to triple-digit builds.”

“The combination of a low absolute storage level to start the season, burgeoning production and lower gas prices has been stoking injections,” Energy Aspects said. “Injections into salt inventories have been particularly high, as storage at such facilities can be ”turned’ more quickly, allowing capacity holders to take advantage of any potential profit-taking in the spread between cash and nearer-term forwards during peak cooling season.

“…While we anticipate such strong injection activity will help stoke triple-digit storage injections for at least the next four storage reports, the salt push is limited in seasonal scope. As cooling loads build, the prop-up from salt cavern injections will bow out seasonally and take balances back toward double-digit injections.”

Meanwhile, traders on Tuesday got further clarity on the timing for incremental liquefied natural gas (LNG) export demand as Sempra Energy announced that the first of three trains at its Cameron LNG facility in Louisiana achieved first production.

This comes amid a recent escalation of the trade war between the Trump administration and China, a conflict that threatens to cause collateral damage for domestic LNG exports. The White House has increased tariffs to 25% from 10% on $200 billion worth of Chinese products, and Beijing retaliated Monday with higher tariffs on a revised list of $60 billion worth of U.S. products, including an increase to 25% from 10% for LNG cargoes arriving June 1 and beyond.

Analysts with Barclays said U.S. LNG exports to China, already down since last year, are likely to fall further as a result of the higher tariffs.

“China’s imports of U.S. LNG have fallen by more than 70% year/year since it imposed a 10% tariff last September, despite considerable growth in overall Chinese imports and U.S. exports over that time,” the Barclays analysts said. “The increase to 25% duty adds further pressure and could push U.S.-China LNG trade flows to zero from one to two cargoes per month to China in 1Q2019.”

The trade war also carries implications for U.S. LNG players seeking long-term contracts with Chinese buyers, Wood Mackenzie analysts said Monday. “The last long-term contract signed by a Chinese offtaker and U.S. seller was in February 2018 — before the trade war began, when PetroChina signed a 25 year” sales and purchase agreement with Cheniere Energy Inc.

Since then, Chinese buyers have announced long-term agreements for LNG supplied from the rest of the world, “including projects in Mozambique and Canada, and portfolio sellers like Qatargas and Petronas,” according to Wood Mackenzie. “…An ongoing trade war between the U.S. and China will continue to create hesitancy for Chinese buyers to sign up for new long-term volumes.”

West Texas prices strengthened at most locations on Tuesday. Waha jumped 30.5 cents to 76.5 cents.

The natural gas transportation constraints in the Permian Basin have producers looking ahead to the start-up later this year of Kinder Morgan Inc.’s Gulf Coast Express (GCX) pipeline. According to BTU Analytics analyst Tony Scott, it remains an open question whether the new capacity will relieve depressed West Texas prices or simply “unleash a wave of new supply.”

Based on satellite data, BTU estimated that vented and flared volumes “were escalating rapidly” in the Permian last summer before peaking at more than 0.5 Bcf/d by the end of 2018, indicating a “significant source of incremental supply” available to fill GCX once it enters service.

BTU is also expecting Permian operators to ramp up completions and bring more wells online into the second half of 2019, coinciding with additional crude oil takeaway capacity hitting the market, according to Scott.

“The combination of new wells being turned to sale and currently shut-in and/or flared volumes could rapidly fill Gulf Coast Express,” Scott said. “Once Gulf Coast Express fills, the cycle of price weakness at Waha will begin again.”

Maintenance on the NET export pipeline out of South Texas into Mexico has completed, NGI’s Mexico GPI was told, with U.S. import flows into Mexico’s Sistrangas pipeline system reaching 3.289 Bcf/d on May 9, having dropped to 1.659 Bcf/d on April 21 following work on the Agua Dulce Compressor Station in South Texas.

Meanwhile the 2.6 Bcf/d Sur de Texas-Tuxpan marine pipeline should be in service in June, developer TC Energy Corp. said last week, as Mexico heads into its hottest summer months when natural gas demand traditionally peaks.