US natural gas futures fall from 7-month high

US natural gas futures extended losses on Thursday, falling more than 1%, following the release of a federal report showing a slightly bigger-than-expected storage build last week.

Earlier in the morning, the contract rose to a seven-month high on forecasts calling for cold weather to blanket much of the country though mid-November.

The US Energy Information Administration (EIA) said utilities added a bigger-than-usual 89 billion cubic feet (bcf) of gas to storage during the week ended October 25.

That is above the 86-bcf build analysts forecast in a Reuters poll and compares with an injection of 49 bcf during the same week last year and a five-year (2014-18) average build of 65 bcf for the period.

The increase boosted stockpiles to 3.695 trillion cubic feet (tcf), 1.4% above the five-year average of 3.643 tcf for this time of year.

Earlier this year, the amount of gas in inventory was as much as 33% below the five-year average in March 2019. But with production at record highs, analysts said stockpiles should end the summer injection season above normal levels at around 3.75 tcf on October 31.

Traders, however, said if current cold forecasts hold, utilities will likely start pulling gas out of storage during the week ending Nov. 8, which is a week before the usual five-year average.

Front-month gas futures for December delivery on the New York Mercantile Exchange were down 2.8 cents, or 1.0%, at $2.663 per million British thermal units at 10:44 a.m. EDT (1444 GMT). Earlier in the session, the contract was trading at its highest since March.

Before EIA released the storage report, the front-month was down 0.6%.

So far this week, the front-month was up about 16% due to the cold November forecasts, putting the contract on track for its biggest weekly gain since February 2014.

For the month, the contract was up more than 14%, putting it on track for its biggest monthly gain since November 2018.

Despite Thursday's price decline, the front-month remained in technically overbought territory with a relative strength index (RSI) over 70 for a third day in a row for the first time since September.

Over the next six to 14 days, the US National Weather Service forecast temperatures in the Lower 48 US states would remain lower than normal over the middle and Northeastern parts of the country.

Refinitiv projected that average gas demand in the Lower 48, including exports, would rise from 95.0 billion cubic feet per day (bcfd) this week to 102.6 bcfd next week. That compares with Refinitiv's forecasts on Wednesday of 94.8 bcfd for this week and 102.4 bcfd for next week.

Gas flows to liquefied natural gas (LNG) export plants rose to 7.4 bcfd on Wednesday from 7.2 bcfd on Tuesday, according to Refinitiv data. That compares with an average of 6.9 bcfd last week and an all-time daily high of 7.5 bcfd on October 26.

Pipeline flows to Mexico eased to 5.3 bcfd on Wednesday from 5.5 bcfd on Tuesday, according to Refinitiv data. That compares with an average of 5.3 bcfd last week and an all-time daily high of 6.1 bcfd on September 18.

Gas production in the Lower 48 slipped to a two-week low of 93.5 bcfd on Wednesday due to small declines in Colorado and Texas, down from 93.7 bcfd on Tuesday, according to Refinitiv data. That compares with an average of 94.3 bcfd last week and an all-time daily high of 94.9 bcfd on October 28.