US natural gas futures fell on Thursday after a report showed that storage levels climbed to a record high and on conflicting weather forecasts showing continued mild weather. The US Energy Information Administration said utilities added 30 billion cubic feet of gas into storage during the week ended November 11, in line with analysts estimates for a build of 31 bcf.
That compared with builds of 54 bcf in the prior week, 26 bcf a year earlier and a five-year average injection of 3 bcf. While both the US and European weather models projected temperatures would remain warmer-than-normal through early December, the US model called for the weather to cool during that time, while the European model showed the weather would remain much warmer-than-normal.
Front-month gas futures for December delivery on the New York Mercantile Exchange fell 6.1 cents, or 2.2 percent, to settle at $2.703 per million British thermal units. The latest build increased stockpiles to a record high of 4.047 trillion cubic feet during the week ended on November 11. Analysts projected inventories could approach 4.1 tcf later this month. But if the forecast for colder, near-normal weather in December, January and February turns out to be correct, analysts said stockpiles would not remain at record highs for long as utilities quickly pull gas out of storage caverns to meet rising heating demand.
Over the past few weeks, long-term forecasts called for warmer-than-normal weather in November, December, February and March, with only January seen at near-normal levels. Those bearish forecasts caused many speculators to give up on their earlier bullish bets for cold this winter.
Thomson Reuters projected US gas usage would rise to an average of 77.4 billion cubic feet per day this week and 86.9 bcfd next week from 73.0 bcfd last week due to seasonal increases in heating demand that are necessary even during mild weather in November.
Gas supplies, meanwhile, should remain about the same as last week at 78.1 bcfd during the next two weeks, Thomson Reuters data showed. US production averaged 70.4 bcfd over the past 30 days, its lowest since 2013. But it has risen over the past week to an average of 71.0 bcfd as drillers slowly raised their output in the Marcellus and Utica shale basins in Pennsylvania and Ohio since prices there have increased. The price of next-day gas at the Dominion South in southwestern Pennsylvania this week climbed to its highest since March 2015.