U.S. natural gas futures inched up in choppy trade on Thursday, hovering near their lowest since March, after a mixed reaction to a federal report showing a larger-than-expected storage increase last week, with investors also assessing upcoming seasonal demand.
Front-month gas futures edged up 2.9 cents, or 0.5%, to $5.49 per million British thermal units (mmBtu) by 11:38 a.m. EDT (1538 GMT), after sliding to $5.253 per mmBtu.
The U.S. Energy Information Administration (EIA) said utilities added 111 billion cubic feet (bcf) of gas to storage during the week ended Oct. 14, more than the 105 bcf build analysts forecast in a Reuters poll and substantially more than the year-ago weekly build of 91 bcf and a five-year (2017-2021) average increase of 73 bcf. It was also the fifth week in a row that stockpiles increased by over 100 bcf.
“There’s been so much selling pressure over the last week or so that we were bound to see some (short) covering at some point,” but there’s time for the market to react further this session, said Robert DiDona of Energy Ventures Analysis.
Looking toward November, “if we don’t see a bullish weather pattern start to set up for the early start of winter, that could result in additional price volatility because we’ll see selling subsequently,” DiDona said.
U.S. gas futures remain up about 42% this year as soaring global gas prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading at $34 per mmBtu in Europe and $30 in Asia.
The market “is getting extremely over-sold and even though we’ve seen some sizable injections, supplies are still too low going into winter and if the weather changes, if we get some cold weather as some people are predicting in November or December, the market could change,” said Phil Flynn, analyst at Price Futures Group.
U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the outage at a Freeport liquified natural gas (LNG) facility limit U.S. exports of LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.5 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.
With milder weather coming, Refinitiv projected average U.S. gas demand, including exports, would fall from 100.6 bcfd this week to 95.5 bcfd next week.