US natural gas futures ended a day of volatile trade little changed on Thursday after earlier rising almost 2 percent and falling almost 3 percent to a two-month low. Traders and analysts said the market largely ignored a government report showing a smaller-than-expected weekly storage build and focused instead on the latest federal weather report projecting a warm winter for much of the country.
Front-month gas futures rose 1.9 cents, or 0.7 percent, to settle at $2.873 per million British thermal units. At the low, the contract fell to its lowest since August 8. The US National Weather Service on Thursday projected the weather would be warmer than normal during the December-February period.
The US Energy Information Administration said that utilities added a smaller than expected 51 billion cubic feet of gas into storage in the week to October 13. That fell short of the 55 bcf analysts estimated in a Reuters poll and compares with a 77 bcf increase during the same week a year earlier and the five-year average build of 78 bcf for the period.
"The mild weather set-up for the next several days is just too much for the supportive storage data point to overcome," said John Kilduff, partner at energy hedge fund Again Capital LLC in New York, noting the market can only see inventories as "well supplied going into winter." Last week's build left total stocks at 3.65 trillion cubic feet, just a little below the five-year average of 3.68 tcf for this time of year.
Analysts forecast utilities will add just 1.7 tcf of gas into storage during the April-October injection season due in part to low output earlier in the year and rising sales abroad. That is much less than the 2.1 tcf seen on average over the past five years. If correct, that would leave stockpiles at the end of October at 3.8 tcf versus a record high of 4.0 tcf on October 31 last year and a five-year average (2012-2016) of 3.9 tcf.
Some traders and analysts, however, noted utilities would likely continue adding gas into storage through the middle of November, boosting total stocks to around 3.9 tcf, near the five-year aver for the annual peak. Other traders, however, said gas prices could still spike in the next month or two if inventories remain lower than normal and the coming winter is colder than the past two snow seasons, which were among the warmest on record.
In the short term, Thomson Reuters forecast US gas consumption would rise to 73.4 billion cubic feet per day (bcfd) next week from 71.6 bcfd this week. The projection for next week was higher than the 72.7 bcfd predicted on Wednesday. Production in the lower 48 US states increased to an average of 73.7 bcfd over the past 30 days from 69.9 bcfd during the same period a year ago. That is just a little short of the 73.8 bcfd seen over the same 30-day period in 2015 when output was at a record high.