US natural gas futures edged lower on Thursday on forecasts for less cooling demand over the next two weeks, even though weekly data showed a small storage build in line with market expectations. Front-month gas futures fell 1.1 cents, or 0.4 percent, to settle at $2.80 per million British thermal units. The US Energy Information Administration (EIA) said utilities added a lower-than-normal 20 billion cubic feet of gas into storage during the week ending July 28, in line with a 21 bcf injection estimate in a Reuters poll.
That compared with a 3 bcf withdrawal during the same week a year earlier and a five-year average build of 44 bcf. "The (EIA) data was well below the 44-bcf five-year average refill and therefore bullish on a seasonally adjusted basis, but apparently not bullish enough to motivate significant buying," Citi said in a note. Meteorologists forecast temperatures during the month of August would be near normal after a warmer-than-average June and July.
"Most views now stretch out to about the 17th of this month are still favouring some unusually cool temperatures across most of the US that will be cutting air conditioning requirements appreciably and reducing CDD (Cooling Degree Days) accumulation," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note. Thomson Reuters projected US gas consumption will slide to 76 billion cubic feet per day (bcfd) next week from 77.3 bcfd this week as the weather moderates and air-conditioning usage eases.
The data projected US gas production in the lower 48 states would rise to 71.3 bcfd on Thursday. Over the past 30 days, output has averaged 72.1 bcfd, up from 70.7 bcfd during the same period a year earlier. That, however, was down from the 30-day average of 73.6 bcfd in 2015, when production was at a record high. US exports were expected to average 8.1 bcfd this week, up 31 percent from a year earlier, according to the data.
Analysts said utilities likely will stockpile just 1.7 trillion cubic feet of gas during the April-October injection season. Limiting the amount of fuel going into storage are several factors, including relatively low output, rising sales abroad and higher-than-average cooling demand earlier this summer. That build, which is far below the five-year average of 2.1 tcf, would put inventories at 3.8 tcf at the end of October, below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf.
Analysts noted prices could spike later this year should inventories remain low and if this winter is colder than a year earlier. Meteorologists predict this winter's temperatures will be around average in December and February and a little warmer than normal in January. The previous two US winters were less cold than normal.
But with inventories holding over the five-year average for this time of year and production slowly rising, speculators have become less inclined over the past few months to keep their bullish bets on the winter near the record highs seen in May.
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