U.S. natural gas futures were up about 1% after turning positive following the release of a federal report showing a much smaller-than-expected storage build last week when power generators burned lots of gas to keep air conditioners humming during an extreme heat wave.
The U.S. Energy Information Administration (EIA) said utilities added just 18 billion cubic feet (bcf) of gas into storage during the week ended Aug. 18.
That was much smaller than the 33-bcf build analysts forecast in a Reuters poll and compares with an increase of 54 bcf in the same week last year and a five-year (2018-2022) average increase of 49 bcf.
Last week’s increase boosted stockpiles to 3.083 trillion cubic feet (tcf), or 9.5% above the five-year average of 2.815 tcf for the time of year.
Front-month gas futures for September delivery on the New York Mercantile Exchange rose 3.5 cents, or 1.4%, to $2.532 per million British thermal units at 10:36 a.m. EDT (1436 GMT).
Before EIA released the storage report, gas prices were down about 2.2% and were trading near a 10-week low.
With last week’s heat wave continuing into this week in the central U.S., power demand was on track to hit record highs in the 15-state Midcontinent Independent System Operator (MISO) territory from Minnesota to Louisiana on Thursday and the Electric Reliability Council of Texas (ERCOT) grid in Texas on Friday.
Both MISO and ERCOT forecast power supplies would fall short of projected demand plus required reserves on Thursday.
Extreme heat boosts the amount of gas burned to produce power for cooling, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states had eased to 101.6 billion cubic feet per day (bcfd) so far in August from 101.8 bcfd in July. That compares with a monthly record of 102.2 bcfd in May.
Meteorologists forecast the weather in the Lower 48 states will remain mostly hotter than normal through at least Sept. 8.
Refinitiv forecast U.S. gas demand, including exports, would hold around 104.0 bcfd this week and next. The forecast for next week was lower than Refinitiv’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants fell from an average of 12.7 bcfd in July to 12.2 bcfd so far in August due mostly to reductions at Cheniere Energy’s Sabine Pass in Louisiana and Corpus Christi in Texas. That compares with a monthly record of 14.0 bcfd in April.
(Reporting by Scott DiSavino; editing by Jonathan Oatis and Nick Zieminski)