US natural gas futures gained over 1 percent on Thursday before the US Fourth of July holiday weekend after the government reported a smaller than normal storage build, while next-day gas and power in the Northeast fell to record lows. Front-month gas futures on the New York Mercantile Exchange closed up 3.9 cents at $2.822 per million British thermal units.
Ample supplies and weak demand, meanwhile, pushed next-day gas and power prices in New York, New England and the Mid-Atlantic states for Monday to record lows on the Intercontinental Exchange. The US Energy Information Administration said utilities added 69 billion cubic feet of gas into storage during the week ended June 26, in line with the 70 bcf estimate in a Reuters poll.
That compared with builds of 75 bcf in the prior week, 102 bcf a year earlier and a five-year average increase of 75 bcf. The latest Global Forecast System weather model for the lower 48 US states called for steady, near-normal temperatures over the next two weeks, with 200 population-weighted cooling degree days. That compared with Wednesday's forecast of 200 CDDs and a 30-year norm of 193 CDDs. Thomson Reuters Analytics projected consumption in the lower 48 would edged up to an average 59.4 billion cubic feet per day over the next two weeks. That compared with Wednesday's forecast of 59.3 bcfd and a 30-year norm of 56.4 bcfd.
While residential, commercial and industrial customers used near-normal amounts of gas for this time of year, power generators continued to burn much more because of its relatively low cost compared to coal. Power generators were expected to use on average 31.6 bcfd of gas over the next two weeks, according to Thomson Reuters Analytics. That compared with 26.3 bcfd a year earlier and a 30-year norm of 28.1 bcfd.
Despite a second consecutive day of higher coal futures after falling to a 2007 low earlier in the week, the premium of gas futures over coal remained above $1 per mmBtu for a 17th consecutive day for the first time since December, making it more likely some generators will burn coal instead of gas. Production in the lower 48 states was expected to hold at 73.5 bcfd on Thursday, the same as Wednesday, according to Thomson Reuters Analytics. That compared with 69.1 bcfd a year ago and a record high of 74.5 bcfd in December.
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