US natural gas futures jumped over 5 percent on Thursday, its biggest percentage gain since December, as forecasts for more cool weather through the end of April offset a report that inventories rose more than expected last week. Front-month gas futures on the New York Mercantile Exchange closed up 10.7 cents, or 5.6 percent, at $2.018 per million British thermal units, on track for a second weekly gain in a row.
The US Energy Information Administration said utilities added 12 billion cubic feet of gas into storage during the week ended April 1, which topped analysts' consensus estimate for an 8-bcf build in a Reuters poll. A record 2.480 trillion cubic feet of gas was stored at the end of the November-March winter withdrawal season, topping the previous peak of 2.472 tcf at the end of March 2012, as heating demand was light during one of the warmest winters on record.
As the April-October summer injection season began, analysts said prices would have to remain low for the rest of 2016 to pressure producers to reduce output and encourage power generators to keep burning more gas instead of coal to prevent gas supplies from hitting storage limits of 4.3 tcf at the end of October. Spot prices at the Henry Hub benchmark in Louisiana have averaged $1.96 so far in 2016, the lowest start to a year since 1999, while futures for the balance of 2016 were fetching $2.30. That compares with an average of $2.61 in 2015, the lowest since 1999.
US drillers in the lower 48-states have already cut back on dry gas output, producing on average 73.1 bcf per day so far this year versus a record high of 73.5 bcfd in all of 2015, according to Thomson Reuters Analytics. The US power sector has burnt about 24.4 bcfd so far in 2016, compared to 22.8 bcfd over the same period in 2015, according to Thomson Reuters data.
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