US natural gas futures rose 1.5 percent on Thursday after a government report showed a smaller-than-expected storage addition, raising concern that the industry is making a slow start in replenishing supplies needed for the next heating season. Front-month natural gas futures on the New York Mercantile Exchange rose for a fourth day, settling up 6.9 cents, or 1.5 percent, to $4.655 per million British thermal units.
The US Energy Information Administration said utilities injected 4 billion cubic feet of gas into storage last week, well below analyst estimates of an 13 bcf injection in a Reuters poll and the five-year average injection of 9 bcf. Last year, utilities pulled 25 bcf of gas from storage during a late blast of cold weather.
Gas in storage is now at 826 bcf, still the lowest for this time of year since 2003.
"With stock levels currently so low, a slow start to the season simply increases the odds that the industry will not be able to build a large enough inventory buffer to prevent the possibility of winter time price shocks," said Teri Viswanath, a natural gas market strategist at BNP Paribas in New York.
The May contract was drifting lower early Thursday on warmer weather forecasts, but jumped as high as $4.70 per mmBtu, or 2.4 percent, after the EIA report was issued.
The 11-cent increase put the contract at the highest level since mid-March.
Gas futures are now up 10 percent since January 1.
While the low initial injection number "is disconcerting" for those hoping for a storage recovery, there is plenty of time for the season to get back on track, said Kent Bayazitoglu, director of market analytics at Gelber & Associates.
"Disappointing injections in the May and June time frame, when the weather is most mild, will be a real cause for concern," Bayazitoglu said in a note to clients.
Analysts forecast utilities may add a record 2.62 trillion cubic feet during the April-October injection season just to get storage back to 3.442 tcf before next winter, the lowest amount of gas in storage at the start of a heating season since 2005.
That is 10 percent below the 3.834 tcf in storage at the start of the 2013/14 heating season in November and 11 percent below the 3.848 tcf five-year (2009-2013) average.
Analysts also boosted their 2014 price forecasts for gas at Henry Hub, the benchmark US supply point in Louisiana, to an average of $4.59 per million British thermal units, up about 5 percent over their previous $4.37 forecast in February.
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