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US natural gas futures rose on Friday as crude oil topped $50 a barrel for the first time this month and the East Coast got its first taste of summer-like weather. Traders, however, noted temperatures over the next two weeks were expected to moderate, keeping gas use low during that time. Front-month gas futures rose 7.4 cents, or 2.3 percent, to settle at $3.256 per million British thermal units, the highest close since May 15.
Despite Friday's gain, the front-month fell 5 percent this week, its biggest weekly loss since late February. That follows a near 5 percent gain last week. That gain left the contract up 29 percent from an eight-month low of $2.522 set in February. Investors see a possible price spike later this year if stagnant production and mounting exports leave inventories unusually low before next winter.
Since the start of the year, US gas output has held at its lowest level in three years, averaging just 70.8 billion cubic feet per day during the past 30 days. That compares with 71.9 bcfd during the same period in 2016 and 73.3 bcfd in 2015. US sales abroad were expected to reach 8.2 bcfd this week, up 37 percent from a year earlier, according to Reuters data.
US gas consumption was projected to fall to 66.9 bcfd in two weeks from 68.8 bcfd next week as temperatures moderate, reducing the amount of gas power generators must burn to keep air conditioners humming, the data showed. Analysts forecasts utilities added 77 billion cubic feet of gas into storage during the week ended May 19. That compares with an increase of 71 bcf a year earlier and a five-year average build of 90 bcf for that period. If correct, the build would leave inventories about 11 percent above normal for this time of year.
Meteorologists forecast this summer will be slightly warmer than normal but not quite as hot as last year, prompting expectations that power generators will use a little more gas than usual. However, some of that increased demand at least in the eastern part of the country could go to coal since both fuels have cost about the same in recent weeks.
Regardless of which fuel power generators use this summer, analysts forecast stagnant gas output and higher foreign sales will cause inventories to rise by only 1.6 trillion cubic feet during the April-October injection season. That build, which is far below the five-year average of 2.1 tcf, would put storage at just 3.7 tcf at the end of October, well below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. Traders said that prospect and the possibility of normally cold weather next winter after two unusually mild seasons have prompted money managers to boost bullish bets to their highest in three years.

Copyright Reuters, 2017

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