US natural gas futures settled lower on Thursday after federal data showed a bigger-than-normal inventory build on worries about demand disruption due to the hurricanes in the Atlantic and cooler temperature views. Front-month gas futures for October delivery on the New York Mercantile Exchange fell 1.9 cents or 0.6 percent to settle at $2.981 per million British thermal units.
"The injection was above the five-year average and so much larger than what we have been seeing lately," said Daniel Myers, market analyst at Gelber & Associates in Houston. US utilities injected 65 billion cubic feet (bcf) of natural gas into inventories during the week ended September 1, the US Energy Information Administration reported on Thursday.
The build was in line with the 64 bcf injection projected by analysts in a Reuters poll, but above the 38 bcf build during the same week a year ago and a five-year average build for that week of 58 bcf. "We are still seeing some bearish factors with some of the demand destruction left over from Harvey that hit the Gulf Coast and now with Hurricane Irma approaching Florida, that just adds to the cooler temperatures and reduced power demand," Myers added.
Another Category 1 hurricane, Katia, swirling in the Gulf of Mexico is likely to gain to near major hurricane strength by landfall, the US National Hurricane Center said. Prices, however, may get some support from the hurricanes that could affect Gulf of Mexico gas production activities within the coming 1-2 weeks, said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates.
Caribbean and Gulf Coast energy infrastructure was shutting down due to Hurricane Irma, even as recovery operations from Hurricane Harvey were underway. Thomson Reuters projected US gas consumption would slide to 67.90 bcfd next week from 69.40 bcfd this week as the weather cools and air conditioning demand declines.
In the past 30 days, US gas production in the lower 48 states rose to an average of 73.1 bcfd from 71.5 bcfd a year earlier. That was still far short of the 74.2 bcfd during the same time in 2015, when output was at a record high, Reuters data showed. US exports are expected to average 6.9 bcfd this week, down 8 percent from a year earlier, according to the data. Exports, however, were up from Wednesday due to an increase in deliveries from Mexico and after the first LNG vessel entered the Sabine Pass export port area since Harvey hit the Gulf Coast.
Utilities probably would stockpile 1.7 trillion cubic feet of gas during the April-October injection season, analysts said. Relatively low output, rising sales abroad and higher-than-average cooling demand earlier this summer have limited the amount of fuel going into storage this year.
The projected build, which is below the five-year average of 2.1 tcf, would put inventories at around 3.8 tcf at the end of October, below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. Natural gas prices could spike later this year should inventories remain low and the coming winter is colder than the last two snow seasons, which were among the warmest on record, according to analysts. In their latest forecasts, meteorologists predicted temperatures would be colder than normal in November and December but warmer than average in January and February.