US natural gas futures jumped to a two-week high on Thursday following a report showing a smaller-than-expected storage build and forecasts for above-normal heat through late June. The US Energy Information Administration (EIA) said utilities added 78 billion cubic feet of gas into storage during the week ended June 9, leaving inventories about 9 percent above-normal for this time of year.
That fell short of the 86-bcf build analysts estimated in a Reuters poll and compared with a 68 bcf increase during the same week a year earlier and a five-year average build of 87 bcf for the period. After closing at their lowest in almost 13 weeks on Wednesday, front-month gas futures on Thursday rose 12.3 cents, or 4.2 percent, to settle at $3.056 per million British thermal units - its highest close since May 31. That was the front-month's biggest daily percentage gain since early April.
Despite the increase on Thursday, price declines in recent weeks due to stubbornly high inventories and a mild spring have left the front-month 11 percent below a recent high of $3.431/mmBtu on May 12. US gas consumption was projected to climb to 76.3 billion cubic feet per day next week from 70.9 bcfd this week as temperatures climb and power generators burn more gas to meet rising air conditioning demand, according to Reuters data.
So far this week, US output over the past 30 days averaged 71.4 bcfd, compared with 71.3 bcfd in the same period in 2016 and 73.0 bcfd in 2015. US exports, meanwhile, were expected to average 8.1 bcfd this week, up 50 percent from a year earlier, the data showed. Meteorologists forecast this summer will be slightly warmer than normal, but not quite as hot as last year, likely prompting power generators to burn a little more gas than usual to meet air conditioning demand, though less than in 2016.
Analysts forecast gas inventories will rise by only 1.6 trillion cubic feet (tcf) during the April-October injection season due to relatively low output so far in 2017 and mounting sales abroad.
The build, which is far below the five-year average of 2.1 tcf, would leave storage at just 3.7 tcf at the end of October, well below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. Traders said the possibility of low inventories and normally cold weather from December-February after the past two unusually mild winters could cause prices to spike later this year. But with inventories holding at above-normal levels for this time of year and production slowly rising, speculators have lost the rationale to keep bullish bets near record highs over the past three weeks. Last week, they cut their net longs by the most on record.