US natural gas futures on Thursday edged higher for a fourth day in a row to a four-month high on forecasts for continued above-normal cooling demand over the next two weeks and a slightly smaller-than-expected weekly storage build. After surging 21 percent over the past three days, including a front-month roll from the lower June to the higher July contract, gas futures for July delivery on the New York Mercantile Exchange rose 2.4 cents, or 1 percent, to settle at $2.405 per million British thermal units.
That kept the front-month in oversold territory with a Relative Strength Index (RSI) over 70 for a third consecutive day for the first time since May 2015. The US Energy Information Administration said utilities added 82 billion cubic feet of gas into storage during the week ending May 27, slightly less than analysts' consensus estimate for an 85 bcf build in a Reuters poll.
That compared with builds of 71 bcf in the prior week, 126 bcf a year earlier and a five-year average of 98 bcf. Despite the recent gains, analysts said prices were likely to remain relatively low this year after a warm winter left stockpiles at record highs. To avoid filling storage caverns to capacity, producers are likely to cut output and power generators to burn more gas instead of coal, they noted.
Spot prices at the Henry Hub have averaged $1.95 so far in 2016, the lowest first five months since 1999. The balance of 2016, meanwhile, was trading at $2.62, the highest since October. That compares with an average of $2.61 in 2015, the lowest level since 1999.
The US power sector has been burning about 25.2 bcf per day so far this year, compared with 22.9 bcfd a year earlier, according to Thomson Reuters Analytics. Power generators used record amounts of gas in 2015 and are expected to burn even more this year, according to government estimates. US drillers have reduced dry gas output in the lower 48 states to 73.1 bcfd on average so far this year from a record 73.5 bcfd in 2015. Production on Thursday, however, was expected to fall to 72.0 bcfd, the lowest this year.
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