US natural gas futures were little changed on Thursday as rising production expectations offset a federal report showing the first weekly summer storage withdrawal since 2006. In addition, traders noted the market was more focused on the mountain of gas remaining in storage than forecasts for continued hotter-than-normal weather for the next two weeks.
"The market wants to sell but bullish storage changes and weather is not allowing it," said Kent Bayazitoglu, director of market analytics at energy consulting firm Gelber & Associates in Houston. Front-month gas futures for September delivery on the New York Mercantile Exchange fell 0.5 cents to settle at $2.834 per million British thermal units.
The US Energy Information Administration said utilities pulled 6 billion cubic feet of gas out of storage during the much hotter-than-normal week ended on July 29. That was only the third weekly withdrawal during the summer in history, including two in 2006, according to EIA data going back to 1994. That was less than analysts estimates for a build of 2 bcf in a Reuters poll, and compared with builds of 41 bcf during the same week last year and the five-year average build of 54 bcf for that week.
In Texas, next-day power prices at the Ercot North hub climbed to their highest in a year as a heat wave baked the state. Despite the smaller-than-normal injections, analysts still expected stockpiles to start the winter heating season in November at all-time highs due to the record amount of gas that 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 $3.01, while calendar 2017 futures were fetching $3.18. Since the start of the year, US drillers have pulled on average 72.9 bcf per day out of the ground, compared with 73.1 bcfd a year earlier, according to Thomson Reuters data. Over the past month, however, output averaged 72.7 bcfd versus an average of 72.0 bcfd during the prior 30-day period, according to Thomson Reuters data.