US natural gas futures slightly up

US natural gas futures ended a few cents higher on Friday, clawing back some of the previous session's 3 percent drop that came under pressure from a bigger-than-expected storage build. Front-month gas futures on the New York Mercantile Exchange closed up 3.4 cents, or 0.9 percent, at $3.857 per million British thermal units. The October front-month was up 1 percent for the week. It was down 5 percent for the month and down 9 percent for the year to date.
Analysts forecast utilities added 93 billion cubic feet of gas into storage this week, exceeding builds of 92 bcf last week, 48 bcf a year earlier and a five-year average of 71 bcf. The numbers will be released on Thursday, September 18. US weather models predicted slightly warmer-than-normal temperatures over the next two weeks, with 111 cooling degree days, down from 123 on Thursday, versus a normal of 104 for this time of year, according to Thomson Reuters Analytics.
The US National Hurricane Center is watching three systems in the Atlantic but only one is of immediate concern to the market. Disturbance One is located over southern Florida and has a 30 percent chance of strengthening into a depression over the next five days as it moves west into the Gulf of Mexico, down from a 40 percent chance of strengthening earlier Friday.
But the Gulf of Mexico is not as important to the market as it was a decade ago when it 20 percent of US gas came out of the region. Only 4 percent of US gas came from the region in 2014 due to booming production from shale gas fields like the Marcellus in Pennsylvania, as well as destruction of Gulf Coast infrastructure by Hurricanes Katrina and Rita in 2005.
On the NYMEX, the premium of the front-month gas contract over spot Appalachian coal climbed to $1.49 per mmBtu from $1.47 on Thursday. A gas premium above $1.50 makes it cost-effective for some utilities to burn coal. Next-day gas at the Chicago citygates lost nine cents to $3.86, while the Southern California Border lost seven cents to $4.04 and Dominion South in south-west Pennsylvania lost 35 cents to $2.04. In power markets, the Mid Columbia hub in the Pacific Northwest gained $10 to $51 per megawatt hour, while SP-15 in Southern California gained $13 to $65 and PJM West in the Mid Atlantic held steady at $35.