US natural gas futures jumped to their highest since January on Thursday on a smaller-than-expected storage build and worries a key pipeline may be delayed, possibly cutting output growth this year. The US Energy Information Administration said utilities added just 45 billion cubic feet (bcf) of gas into storage during the week ended on May 5, the least for that week since 2012.
That fell short of the 53 bcf build analysts forecast in a Reuters poll and compares with an increase of 58 bcf a year earlier and a five-year average build of 73 bcf for that period. It leaves inventories about 14 percent above normal for this time of year. Front-month gas futures rose 8.4 cents, or 2.6 percent, to settle at $3.376 per million British thermal units, its highest close since January 27.
Traders also noted worries Energy Transfer Partners' 3.25-bcf Rover pipeline from Pennsylvania to Ontario might be delayed after federal regulators stopped drilling work following a spill in Ohio. ETP said it does not expect the FERC action to affect the project's planned startup. The pipe will enable Marcellus and Utica shale producers to boost output when it enters service in two phases now planned for July and November.
The price increases kept the front-month up about 34 percent from an eight-month low of $2.522 set in February. Investors anticipate that prices might spike later this year if stagnant production and rising exports leave inventories unusually low before next winter. Since the start of the year, US gas production has remained at its lowest level in three years, averaging just 70.7 billion cubic feet per day during the past 30 days. That compares with 71.9 bcfd during the same period in 2016 and 73.4 bcfd in 2015.
US exports were expected to reach 7.6 bcfd this week, up 23 percent from a year earlier, according to Reuters data. US gas consumption was projected to slide to 67.0 bcfd next week from 68.7 bcfd this week as the weather turns warmer than normal, causing cooling demand to exceed heating demand for the first time this year, the data showed. Traders noted it takes less gas to cool a house than to heat one.
Meteorologists forecast this summer will be slightly warmer than normal but not quite as hot as last year, sparking expectations that power generators will use a little more gas than usual to keep air conditioners humming. Regardless of which fuel power generators use this summer, analysts forecast stagnant gas output and higher foreign sales will cause inventories to rise by only 1.6 trillion cubic feet during the April-October injection season, much less than the five-year average of 2.1 tcf. If that forecast proves correct, storage at the end of October would reach just 3.6 tcf, well below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf.