US natural gas futures were little changed on Friday as increasing production and high inventory levels offset forecasts for warmer weather and greater demand for cooling over the next two weeks. Front-month gas futures rose 1.1 cents, or 0.4 percent, to settle at $3.039 per million British thermal units. For the week, the front-month ended up about 1 percent, its first increase in the past four weeks.
Despite the small gain, recent price declines due to stubbornly high inventories and a mild spring has left the front-month down 11 percent below a recent high of $3.431/mmBtu on May 12. US gas consumption was projected to climb to 71.7 billion cubic feet per day next week and 74.8 bcfd in two weeks from 68.2 bcfd this week as the weather warms, according to Reuters data.
US production over the past 30 days has increased to an average of 71.4 bcfd, but that is still the least for that period in three years. It compares with 71.5 bcfd during the same 30 days in 2016 and 73.0 bcfd in 2015, the data showed. US exports, meanwhile, were expected to average 8.0 bcfd this week, up 38 percent from a year earlier, the data showed.
Analysts forecast utilities added 86 bcf of gas to storage during the week ended June 9, leaving inventories about 10 percent above normal for this time of year. That compares with an increase of 68 bcf during the same week a year earlier and a five-year average build of 87 bcf for the 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.
Traders said the possibility of low inventories and normally cold weather this winter after two unusually mild seasons could cause prices to spike later this year. But with inventories holding at above-normal levels for this time of year and production slowly rising, speculators have lost their reason to keep bullish bets near record highs over the past two weeks. Last week, they cut their net longs by the most since November.
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