US natural gas futures edged higher on Friday but ended down about 4 percent for the week as seasonal forecasts called for little heating or cooling demand through late May. Front-month gas futures for June delivery on the New York Mercantile Exchange rose 2.5 cents, or 1.2 percent, to settle at $2.10 per million British thermal units on Friday.
Analysts noted the latest weather models said demand for air conditioning demand would start to exceed heating usage in the lower 48 US states over the next two weeks as summer approaches. Analysts have said prices this year will have to remain low to pressure producers to cut output and encourage power generators to continue burning gas instead of coal. That would prevent storage caverns from reaching peak capacity levels at the end of the April-October summer injection season after utilities left record amounts of fuel in storage following a warm winter.
Spot prices at the Henry Hub have averaged $1.95 so far in 2016, the lowest start to a year since 1999, while futures for the balance of 2016 are fetching $2.44. That compares with an average of $2.61 in 2015 and is the lowest since 1999. The US power sector is doing its part to mop up those cheap gas supplies, burning about 24.3 billion cubic feet per day so far this year versus 23.0 bcfd a year earlier, according to Thomson Reuters Analytics. Power generators used record-high amounts of gas in 2015 and were expected to use even more this year, according to federal estimates. US drillers have cut dry gas output in the lower 48 states, producing 73.3 bcfd on average so far this year versus a record 73.5 bcfd for all of 2015.
Analysts said a hot summer would push generators to burn even more gas to keep air conditioners humming, while an active hurricane season could reduce some production in the Gulf of Mexico region. Thomson Reuters Analytics forecast the summer would be a little warmer than last year, with July about 13 percent warmer than the 30-year normal and August about 5 percent warmer. Meteorologists expect the upcoming hurricane season to be more active than the quieter-than-normal 2015 period but are mixed on whether there will be more storms this year than usual.
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