US natural gas futures eased on Thursday on forecasts for rising production and mild weather over the next two weeks expected to keep heating and cooling demand low. That decline came despite a government report on Thursday that showed a smaller-than-expected storage build last week.
The US Energy Information Administration said on Thursday that utilities added 42 billion cubic feet of gas into storage in the week to September 29, leaving the total of fuel in inventories near the five-year average for this time of year at around 3.5 trillion cubic feet. That was below analysts' 51-bcf forecast build in a Reuters poll and compared with a year-earlier increase of 76 bcf and the five-year average of 91 bcf.
Front-month gas futures fell 1.7 cents, or 0.6 percent, to settle at $2.923 per million British thermal units. Thomson Reuters projected US gas consumption would rise to 71.8 billion cubic feet per day next week from 68.5 bcfd this week as the weather starts to turn cooler and homes and businesses turn up their heaters.
Production in the lower 48 US states rose to an average 74.2 bcfd over the past 30 days, up from 70.6 bcfd a year earlier but level with the same period in 2015, when output for the year was at a record high, Reuters data showed. The US National Hurricane Center said a depression near Nicaragua strengthened into Tropical Storm Nate and was projected to strengthen into a Category 1 hurricane over the next few days as it moves toward the Gulf of Mexico and the coasts of Louisiana, Mississippi, Alabama and Florida.
Nate caused some energy companies, including BP Plc and Royal Dutch Shell Plc, to pull non-essential workers from offshore production rigs in the eastern Gulf of Mexico. Traders said the storm could disrupt some output over the weekend. US gas exports were expected to average 8.0 bcfd this week, up 45 percent from a year earlier due primarily to higher liquefied natural gas shipments abroad, according to Reuters data.
Analysts estimated US inventories would end the April-October injection season at just 3.8 tcf, primarily because of low production earlier in the year and rising exports. That would fall short of the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf. Some analysts said gas prices could spike later in the year if the coming winter is much colder than the past two, which were among the warmest on record.
However, the premium of futures for March over April 2018, a spread traders use to bet on winter weather, fell to its lowest since February 2016 as production rises and storage was around near normal levels just weeks before the start of the heating season. In their latest forecasts, meteorologists predicted temperatures would be warmer than usual in November and February, near-normal in December and colder than average in January.