US natural gas futures on Thursday eased on forecasts for consumption to decline next week as the weather moderates and on a report showing a bigger-than-expected storage build. The US Energy Information Administration said utilities added 68 billion cubic feet of gas into storage during the week ended May 12, the least for that week since 2012 due to low production and higher exports.
That, however, topped analysts' forecast of a 61-bcf build in a Reuters poll and compares with an increase of 71 bcf a year earlier and a five-year average build of 87 bcf for that period. It leaves inventories about 12 percent above normal for this time of year. Front-month gas futures fell 1 cent, or 0.3 percent, to settle at $3.182 per million British thermal units, the lowest close since May 8.
Despite the small decline the front-month remained up about 26 percent from an eight-month low of $2.522 set in February. Investors see a possible price spike later this year if stagnant production and mounting exports leave inventories unusually low before next winter.
Since the start of the year, US gas output has held at its lowest level in three years, averaging just 70.8 bcfd during the past 30 days. That compares with 71.9 bcfd during the same period in 2016 and 73.4 bcfd in 2015. US sales abroad were expected to reach 8.2 bcfd this week, up 37 percent from a year earlier, according to Reuters data. For next week, US gas consumption was projected to fall to 66.9 bcfd from 67.7 bcfd as temperatures moderate, reducing the amount of gas power generators must burn to keep air conditioners humming, the data showed. Meteorologists forecast this summer will be slightly warmer than normal but not quite as hot as last year, prompting expectations that power generators will use a little more gas than usual.
However, some of that increased demand in the eastern part of the country may go to coal since both fuels have cost about the same in recent weeks. Regardless of which fuel power generators use this summer, analysts forecast that stagnant gas output and higher foreign sales will cause inventories to rise by only 1.6 trillion cubic feet during the April-October injection season.
That build, which is far below the five-year average of 2.1 tcf, would put storage at just 3.7 tcf at the end of October, well below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. Traders said that prospect and the possibility of normally cold weather next winter after two unusually mild seasons have prompted money managers to boost bullish bets to their highest in three years.
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