US natural gas futures ease as oil prices plunge

US natural gas futures eased on Wednesday in sympathy with a sharp decline in crude oil despite forecasts for warmer weather over the next two weeks that is expected to boost cooling demand. US oil futures on Wednesday fell $2.47, or 5.1 percent, to $45.72 per barrel, its lowest close in over a month, following a report showing an unexpected large build in crude stocks last week.
Front-month gas futures, meanwhile, fell 2.2 cents, or 0.7 percent, to settle at $3.020 per million British thermal units. Recent weeks of price declines due to stubbornly high inventories and mild weather forecasts have left the front-month down 12 percent below a recent high of $3.431/mmBtu on May 12.
US gas consumption was projected to climb to 71.2 billion cubic feet per day next week from 68.0 bcfd this week as the weather warms, according to Reuters data. US production over the past 30 days has increased to an average of 71.3 bcfd, but that is still the least for that period in three years. It compares with 71.6 bcfd during the same 30 days in 2016 and 73.0 bcfd in 2015, the data showed. US exports, meanwhile, were expected to average 7.9 bcfd this week, up 36 percent from a year earlier, the data showed.
Analysts said utilities likely added 89 bcf of gas to storage during the week ended June 2, leaving inventories about 9 percent above normal for this time of year. That compares with an increase of 68 bcf a year earlier and a five-year average build of 94 bcf for that period.
Meteorologists forecast this summer will be slightly warmer than normal, but not quite as hot as last year, likely prompting power generators to burn a little more gas than usual to meet air conditioning demand, though less than in 2016. Analysts forecast gas inventories will rise by only 1.6 trillion cubic feet (tcf) during the April-October injection season due to relatively low output so far in 2017 and mounting sales abroad.
That build, which is far below the five-year average of 2.1 tcf, would leave 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.