US natural gas futures fall on moderate demand

US natural gas futures eased on Thursday on forecasts for production to rise and demand to moderate, despite a slightly smaller-than-expected weekly inventory build. The US Energy Information Administration (EIA) said utilities added 57 billion cubic feet (bcf) of gas into storage during the week ended July 7, leaving inventories about 6 percent above-normal for this time of year.
That was slightly lower than the 59-bcf build analysts forecast in a Reuters poll and compared with a 61 bcf increase during the same week a year earlier and a five-year average build of 72 bcf. Front-month gas futures fell 2.4 cents, or 0.8 percent, to settle at $2.961 per million British thermal units.
Thomson Reuters projected US gas consumption would rise to 78.8 billion cubic feet per day next week from 77.4 bcfd. That increase, however, was less than forecast earlier in the week. The data projected US gas production in the lower 48 states would rise to 71.5 bcfd on Thursday, the most in a week. Over the past 30 days, output has averaged 71.5 bcfd, up from 70.7 bcfd during the same period a year earlier.
That, however, was down from the 30-day average of 73.5 bcfd in 2015, when production was at a record high. US exports were expected to average 8.0 bcfd this week, up 38 percent from a year earlier, the data showed.
Meteorologists forecast temperatures in July would remain slightly higher than normal but not quite as hot as last year, while the weather in August would be about average. Analysts expect gas inventories to rise by only 1.7 trillion cubic feet during the April-October injection season, as relatively low output so far in 2017, increased sales abroad and higher-than-normal cooling demand limit the amount of gas left to go into storage.
That build, which is far below the five-year average of 2.1 tcf, would leave storage at just 3.8 tcf at the end of October, below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. After two unusually mild winters, traders say the possibility of low inventories and even normally cold weather during December through February could cause prices to spike late this year.
But with inventories remaining above normal for this time of year and production slowly rising from last year, speculators have become less inclined over the past several weeks to keep bullish bets near record highs.