US natural gas futures on Friday slipped to the lowest level in four days on forecasts for cooler weather and less air conditioning demand over the next two weeks. Traders also noted that Thursday's 2 percent slide after a report showing a neutral storage build to under $3 per million British thermal units continued to send off bearish price signals.
After settling at a 20-month high earlier in the week, front-month gas futures fell 3.5 cents, or 1.2 percent, to settle at $2.955 per mmBtu. Despite Friday's decline, the front-month ended the week up for third time in a row. Next-day gas at the Dominion South hub in western Pennsylvania traded at its biggest discount to the US Henry Hub benchmark in Louisiana since October 2014.
The US Energy Information Administration on Thursday 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. While temperatures remain warmer-than-normal in many parts of the country, this is the time of year when heating demand usually starts to exceed cooling demand.
As the weather cools, the power sector is expected to use just about 1 bcf per day more gas over the next two weeks than a year ago. So far this year, power generators have burned on average 28.4 bcfd versus 26.7 bcfd during the same period last year.
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 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. As the weather cools, demand for gas mostly from the power sector to meet lingering cooling demand was expected to fall to an average of 68.3 next week, versus an average of 71.1 bcfd this week, Reuters data showed.
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