US natural gas futures on Wednesday climbed higher on forecasts for hotter weather over the next two weeks and the possibility of a small, single-digit storage build or withdrawal. Front-month gas futures for September delivery on the New York Mercantile Exchange rose 10.6 cents, or 3.9 percent, to settle at $2.839 per million British thermal units.
In Texas, next-day power prices at the Ercot North hub climbed to its highest level in a year as a heat wave baked the Lone Star state. Analysts estimated utilities added 2 billion cubic feet of gas into storage during the much hotter-than-normal week ended July 29, the least for that week since at least 1993. Several analysts, however, forecast a small weekly storage withdrawal, which would be the first during the summer since 2006. That compared with 17 bcf for the week ended July 22, the least for that week since before 2010, and a build of 41 bcf during the seven days ended July 29 a year ago and a five-year average build for that week of 54 bcf.
The US Energy Information Administration will release its weekly gas storage report at 10:30 am EDT on Thursday. Utilities have injected 826 bcf of gas into storage since the start of the injection season in April, versus 1,411 bcf during the year-ago period and a five-year average of 1,145 bcf. Despite the smaller-than-normal injections, analysts still expected stockpiles will start the winter heating season in November at all-time highs due to the record amount of gas utilities left in storage at the start of the summer season in April.
That inventory glut has kept a lid on next-day prices at the Henry Hub benchmark in Louisiana, which have averaged $2.16 so far this year. That compares with $2.61 in 2015, the lowest since 1999. Those low prices have encouraged power generators to burn record amounts of gas instead of coal and prompted producers to reduce output as they wait for prices to rise. Futures for the balance of the year were trading around $2.97, while calendar 2017 futures were fetching $3.14.