US natgas futures up to 7-week high on small storage build

US natural gas futures turned positive and jumped to a seven-week high on Thursday following the release of a government report showing a smaller-than-expected storage build last week.

Earlier in the morning, the market was trading near a one-week low on forecasts for milder weather in late April and early May than earlier expected.

In addition to the storage report, traders noted prices were up on record exports, recent declines in production and forecasts for cooler weather and higher heating demand this week that could cause utilities to take the unusual step of pulling gas from storage.

The last time utilities pulled gas from storage in April was in 2018.

The US Energy Information Administration (EIA) said utilities added 38 billion cubic feet (bcf) of gas into storage during the week ended April 16.

That was less than the 49-bcf build analysts forecast in a Reuters poll and compares with an increase of 47 bcf in the same week last year and a five-year (2016-2020) average increase of 37 bcf.

Last week's injection boosted stockpiles to 1.883 trillion cubic feet (tcf), or 0.6% above the five-year average of 1.871 tcf for this time of year.

Front-month gas futures rose 6.7 cents, or 2.5%, to $2.759 per million British thermal units by 10:41 a.m. EDT (1441 GMT), putting the contract on track for its highest close since March 3.

Before the EIA released the storage report, the front-month was down 0.1%.

Data provider Refinitiv said gas output in the Lower 48 US states averaged 91.4 billion cubic feet per day (bcfd) so far in April, down from 91.6 bcfd in March. That compares with a record monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would fall from 98.3 bcfd this week to 89.8 bcfd next week as the weather turns seasonally milder. Those forecasts were higher than Refinitiv projected on Wednesday.

The amount of gas flowing to US LNG export plants averaged 11.5 bcfd so far in April, which would top the monthly record of 10.8 bcfd in March.

Analysts said LNG feedgas looks set to break March's record in April even though flows were expected to decline later this month due to planned work on a couple of facilities and the pipelines serving them, including Cheniere Energy Inc's plants in Texas and Louisiana and Cameron LNG's plant in Louisiana.

US pipeline exports to Mexico, meanwhile, averaged 6.1 bcfd so far in April, up from 5.9 bcfd in March and on track to top the monthly record of 6.0 bcfd in September 2020, according to Refinitiv data.