US natural gas futures reversed course to turn positive on Thursday as forecasts for cooler weather this month drove expectations of increased demand for the fuel, offsetting a slightly bigger-than-expected storage build. Gas futures for November delivery on the New York Mercantile Exchange rose 2.8 cents, or 1.3%, to $2.275 per million British thermal units as of 11:31 a.m. EDT (1531 GMT).
The US Energy Information Administration (EIA) said utilities added 112 billion cubic feet (bcf) of gas to storage during the week ended Sept. 27. This was above the 105-bcf build that analysts forecast in a Reuters poll, and compares with an injection of 91 bcf during the same week last year and a five-year (2014-18) average build of 83 bcf for the period.
The increase boosted stockpiles to 3.317 trillion cubic feet (tcf), 0.5% below the five-year average of 3.335 tcf for this time of year. Prices pared losses following the release of the EIA report, shaking off pressure from earlier in the session when they had touched their lowest in more than a month, at $2.207.
"The impact of today's build, which was somewhat above consensus, appears to be moderated in part by a cooler turn to the October forecast that would indicate somewhat higher than initially expected demand," Nina Fahy, head of North American natural gas at Energy Aspects.
"However, the moderating impact of that demand on balances will be marginal given how high production has moved in recent weeks."
There will be 100 heating degree days (HDDs) in the Lower 48 US states over the next two weeks, which compared with Wednesday's projection of 81 HDDs.
HDDs, which measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius), are used to estimate heating demand.
"Natgas is oversold in the short term, and traders are just covering their shorts and taking profits," said Chris Jarvis, analyst at Foothills Exploration.
The amount of gas in inventory has remained below the five-year average since September 2017. It fell as much as 33% below that in March 2019.
But with production hitting record highs, analysts said stockpiles should reach a near-normal 3.7 tcf by the end of summer injection season on October 31. Data provider Refinitiv projected gas demand in the lower 48 US states would rise to an average of 85 bcfd for the current week, from 83.8 bcfd averaged the prior week.
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