US natural gas futures fall on big storage build

US natural gas futures lost 5 percent on Thursday, the biggest percentage loss since March, on a bigger-than-expected storage build during a week that was warmer than normal. The US Energy Information Administration said utilities put 65 billion cubic feet of gas into storage during the week ended August 7, much more than the 55 bcf analysts estimated in a Reuters poll.
That compared with builds of 32 bcf the previous week, 79 bcf a year earlier and a five-year average increase of 48 bcf. Front-month gas futures on the New York Mercantile Exchange closed down 14.4 cents at $2.787 per million British thermal units, erasing Wednesday's 3 percent gain to a near three-month high.
The latest Global Forecast System weather model predicted temperatures in the lower 48 US states would remain at above-normal levels, with 207 population-weighted cooling degree days. That compared with a forecast 209 CDDs on Wednesday and a 30-year norm of 183 CDDs. Thomson Reuters Analytics projected consumption in the lower 48 would ease to an average 60.7 billion cubic feet per day over the next two weeks from a forecast 60.9 bcfd on Wednesday. That compared with a 30-year norm of 56.5 bcfd.
While residential, commercial and industrial customers were using near-normal amounts of gas for the time of year, power generators burned more of the fuel because it is cheaper than coal. Power generators were expected to use an average 32.7 bcfd of gas over the next two weeks, just off the forecast 32.9 bcfd on Wednesday. That compared with a 30-year norm of 28.0 bcfd.
Gas production in the lower 48 was expected to ease to 72.5 bcfd on Thursday from 72.7 bcfd on Wednesday, according to Thomson Reuters Analytics. That compared with 70.5 bcfd a year ago and a record high of 74.5 bcfd in December. The 1.6 bcfd Alliance pipeline from Western Canada to Chicago had returned to service by Thursday morning after shutting on August 7 due to hydrogen sulfide in the pipe.
With Alliance back, net imports from Canada were seen rising to 5.3 bcfd on Thursday from 4.5 bcfd on Wednesday. Exports to Mexico were expected to rise to 2.6 bcfd on Thursday from 2.5 bcfd on Wednesday, the lowest since late June due to a reduction on the NET Mexico pipe, according to Thomson Reuters Analytics.