US natural gas futures on Thursday jumped to their highest close this month on forecasts for increased heating demand next week amid falling production due to disruptions caused by Hurricane Nate in the Gulf of Mexico. Traders said prices also rose because market was reacting to recent forecasts for cold weather and higher heating demand this winter than in the past two winters.
Front-month gas futures rose 10 cents, or 3.5 percent, to settle at $2.989 per million British thermal units, their highest close since September 29. It was the contract's biggest one-day gain since mid September. Separately, next-day gas prices at the Dominion South hub in the Marcellus shale in southwest Pennsylvania fell to their lowest level since September 2016 amid low demand in the region.
Traders noted the price of futures did not react much after the US Energy Information Administration released data showing storage last week increased by slightly more than expected. EIA said utilities added 87 billion cubic feet of gas into storage in the week to October 6, leaving the total amount of fuel in inventories near five-year average for this time of year at around 3.6 trillion cubic feet.
That was higher than the 82 bcf that analysts forecast in a Reuters poll and compares with a 79 bcf increase during the same week a year earlier. It matched the five-year average of 87 bcf for the period. Thomson Reuters forecast US gas consumption would rise to 72.2 billion cubic feet per day next week from 71.9 bcfd this week. That marked an increase in expected usage compared with Wednesday's projection.
Production in the lower 48 US states was expected to fall to 71.3 bcfd on Thursday, its lowest since late June. Output hit a two-year high of 74.8 bcfd in late September but declined over the past week as energy companies temporarily shut wells in the Gulf of Mexico ahead of Hurricane Nate, which hit the region over the weekend. The US National Oceanic and Atmospheric Administration forecast the coming winter would be be 13 percent colder than last winter and close to the average of the previous 10 years.
Based on that forecast, EIA projected colder weather would boost heating demand this winter over the prior two snow seasons, which were among the warmest on record. Even though inventories were still at near normal levels for this time of year, analysts estimated the amount of gas in storage would end the April-October injection season at 3.8 trillion cubic feet (tcf), primarily due to rising sales abroad. That would fall short of the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. US gas exports were expected to average 8.5 bcfd this week, up 67 percent from a year earlier due primarily to higher liquefied natural gas shipments, according to Reuters data.
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