US natural gas futures fell over 2 percent on Thursday despite news that utilities' storage build met expectations for the latest week. The US Energy Information Administration said utilities added 52 billion cubic feet of gas into storage during the week ended September 16, in line with analysts' consensus estimate in a Reuters poll.
That compared with injections of 62 bcf in the prior week, 83 bcf in the same week a year earlier and a five-year average build of 96 bcf. Traders said many in the market had expected an even smaller build that would have pushed prices higher and when that did not happen the market sold off. After settling at a 20-month high on Monday, front-month gas futures fell 6.7 cents, or 2.2 percent, to settle at $2.990 per million British thermal units.
That decline, the biggest since early September, pushed the contract out of overbought territory. Next-day gas at the Henry Hub benchmark in Louisiana held at $3.14 per mmBtu for a second day in a row, its highest since March 2015. The latest weather forecasts continued to call for warmer-than-normal temperatures over the next two weeks, which is expected to keep air conditioning demand stronger than usual through early October. That would leave utilities with less gas to put into storage and likely keep additions low over the next couple of weeks.
Over the past few weeks, several analysts reduced their end-of-season storage expectations after weeks of smaller-than-usual injections and weak production. Storage injections so far this year have averaged just 43 bcf per week versus an average of 79 bcf in 2015 and a five-year average of 70 bcf. Total production in the lower 48 US states has averaged 72.6 bcf per day so far this year, keeping it below last year's record high of 73.3 bcfd. Over the past 30 days, output has averaged 72.3 bcfd, according to Thomson Reuters data.
With warmer weather, demand for gas mostly from power sector use for air conditioning was expected to average 71.1 bcfd this week, up from 70.4 bcfd last week. Next week, gas use is expected to ease to 68.4 bcfd when temperatures are forecast to cool a bit, Reuters data showed.
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