US natural gas futures on Friday slipped as a larger-than-expected storage build and big declines in crude futures offset forecasts for less production and rising cooling demand. The US Energy Information Administration (EIA) said utilities added 72 billion cubic feet of gas to storage during the week ended June 30, leaving inventories about 7 percent above normal for this time of year.
That topped analysts' 64-bcf estimate in a Reuters poll and compared with a 38 bcf increase during the week a year earlier and a five-year average build of 66 bcf. Front-month gas futures fell 2.4 cents, or 0.8 percent, to settle at $2.864 per million British thermal units.
That put the front-month down about 6 percent for the week, its biggest weekly percentage decline since early June. US crude futures fell 2.8 percent to $44.23 per barrel on Friday. US gas consumption was projected to rise to 78.3 billion cubic feet per day next week and 79.1 bcfd in two weeks from 73.3 bcfd this week as forecast warmer weather is expected to boost air conditioning demand, according to Reuters data. The forecast for next week is higher than the outlook earlier in the week.
Gas production, however, was expected to fall to 71.1 bcfd on Friday, its lowest in two weeks. Output over the weekend reached a 14-month high of 72.4 bcfd over the weekend, the data showed. Over the past 30 days, output has averaged 71.5 bcfd, up from 70.8 bcfd the same period a year earlier but still down from 73.4 bcfd in 2015 when production was at a record high.
Meteorologists forecast temperatures in July would be slightly higher than normal but not quite as hot as last year, prompting power generators to burn a little more gas than usual to meet cooling demand, though less than in 2016. Temperatures in August are expected to be near average. Analysts forecast gas inventories will rise by only 1.6 trillion cubic feet during the April-October injection season because of relatively low output so far in 2017 and higher sales abroad.
That 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, below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. After two unusually mild winters, traders say the possibility of low inventories and even normally cold weather during December through February could cause prices to spike late this year.
But with inventories remaining above normal for this time of year and production rising, speculators have lost the rationale to keep bullish bets near record highs over the past several weeks.