U.S. natural gas futures eased into a narrow range on Thursday after a government report showed a bigger-than-usual storage build last week, overshadowing support from forecasts for warmer weather.
Front-month gas futures for July delivery on the New York Mercantile Exchange traded 2.6 cents lower, or 1.1%, to $2.30 per million British thermal units by 11:15 a.m. EDT.
The contract traded at a high point for the day of $2.38 and a low of $2.28 per million British thermal units.
The U.S. Energy Information Administration (EIA) said utilities added 118 billion cubic feet (bcf) of gas into storage during the week ended June 2,
That was slightly bigger than the 113-bcf increase forecast by 16 analysts in a Reuters poll, and compared with a rise of 99 bcf in the same week last year and a five-year (2018-2022) average increase of 100 bcf.
“No matter how you cut it, it certainly is a triple digit injection that you’re putting gas in the ground,” said Robert DiDona of Energy Ventures Analysis.
Prices “will chop around until we see some midday weather model runs and determine whether or not the mid-June heat is still coming in,” DiDona added.
Data provider Refinitiv forecast the number of cooling degree days (CDDs) in the coming two weeks to rise to 167, above the 30-year normal of 149.
CDDs measure the number of degrees a day’s average temperature is above 65 Fahrenheit (18 Celsius) and provide a snapshot into likely demand for cooling.
The EIA’s report also reclassified 14 bcf of gas in the Nonsalt South Central region from working gas – or gas available to market – to base gas, which should be permanently stored to ensure adequate pressure and deliverability rates throughout withdrawal season.
The futures contract should find some support over the next few weeks “if you start to layer in the strength we’re seeing in power burns, the warm weather forecast and the reclassification in today’s storage report,” DiDona said.
Refinitiv estimated natural gas consumption by the U.S. power sector to jump to 38.3 billion cubic feet per day (bcfd) this week from 31.8 bcfd last week, driving overall demand this week to 95.3 bcfd from 90.9 bcfd.
Higher demand from power generators to produce electricity amid rising air conditioning use reduces the fuel available to go into storage for the peak winter heating season. That helps boost prices.
Production, meanwhile, was seen staying largely stagnant at 102.3 bcfd this week from 103 bcfd last week, according to Refinitiv data, before edging up to 102.4 bcfd next week.
(Reporting by Deep Vakil and Rahul Paswan in Bengaluru; editing by Jonathan Oatis and Marguerita Choy)