US natural gas futures fell to their lowest in a week on Friday on forecasts for milder weather that is expected to reduce cooling demand in August and a slow but steady rise in production. Front-month gas futures fell 7.3 cents, or 2.4 percent, to settle at $2.970 per million British thermal units. That is the biggest daily percentage decline since early July and the lowest close since July 13.
For the week, the front-month lost about 1 percent after rising about 4 percent last week. The European model projected US gas consumption would rise from 78.2 billion cubic feet per day this week to a summertime peak of 79.0 bcfd next week before easing to 78.7 bcfd during the first week of August when it sees the weather moderating, according to Thomson Reuters data. US gas production in the lower 48 states increased to a 30-day average of 71.7 bcfd from 70.5 bcfd during the same period last year. That, however, was down from 73.7 bcfd during the same time in 2015, when output was at a record high. US exports, meanwhile, were expected to average 8.1 bcfd this week, up 40 percent from a year earlier, the data showed. Analysts said utilities likely added 34 billion cubic feet of gas into storage during the week ending July 21, leaving inventories about 4 percent above normal for this time of year. That compared with a 20 bcf increase the same week a year earlier and a five-year average build of 47 bcf.
Meteorologists forecast temperatures in August would be near average after a warmer-than-normal June and July. Analysts expect utilities to stockpile 1.7 trillion cubic feet during the April-October injection season. Relatively low output so far in 2017, increased sales abroad and higher-than-average cooling demand this summer are limiting the amount of gas available for storage.
That build, which is far below the five-year average of 2.1 tcf, would leave inventories at 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 normally cold weather from December through February could cause prices to spike later this year. In early forecasts, meteorologists predict December and January will be near normal and February warmer than normal. But with inventories still above average 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 seen in May.
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