U.S. natural gas futures climbed about 1% to a one-week high on a smaller-than-expected storage build and forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
The U.S. Energy Information Administration (EIA) said utilities added 74 billion cubic feet (bcf) of gas into storage during the week ended Oct. 20.
That was smaller than the 80-bcf build analysts forecast in a Reuters poll and compares with an increase of 61 bcf in the same week last year and a five-year (2018-2022) average increase of 66 bcf.
Analysts noted the increase was still bigger than normal for this time of year because mild weather last week kept heating demand low.
On its second-to-last day as the front-month, gas futures for November delivery on the New York Mercantile Exchange (NYMEX) rose 4.2 cents, or 1.4%, to $3.052 per million British thermal units (mmBtu) at 10:37 a.m. EDT (1437 GMT), putting the contract on track for its highest close since Oct. 17.
Before the EIA released the report, the front-month was up about 0.5%.
The December future, which will soon be the front-month, was up about 7 cents to around $3.45 per mmBtu.
That put the front-month up for a fourth day in a row and kept it over the psychological round number of $3 per mmBtu, where lots of put and call options were still open, ahead of the November options expiration on Thursday and the November front-month expiration on Friday.
With almost twice as many $3 November puts outstanding (34,010 contracts) versus $3 November calls (19,735 contracts), according to data from the NYMEX, analysts said the firms that sold those options had more reasons to want the November front-month to close over $3 per mmBtu when those options expire on Thursday (keeping those puts out of the money) than under $3 (putting the calls into the money).
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.9 bcfd so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
Even though temperatures in the Lower 48 will average near normal through Nov. 10, meteorologists noted the weather was turning seasonally cooler and will be much colder than normal from Oct. 29 to Nov 2.
But that extreme cold will only hit parts of the country, with Denver expected to see snow and highs of just 30 degrees Fahrenheit (-1 degree Celsius) on Sunday, while temperatures in New York will reach 80 F (27 C) on Saturday, according to meteorologists at AccuWeather. That compares with normal highs of 60 F (16 C) in New York and 63 F (17 C) in Denver for this time of year.
LSEG forecast U.S. gas demand, including exports, would jump from 97.8 bcfd this week to 107.3 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Wednesday.
Pipeline exports to Mexico slid to an average of 6.9 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Gas flows to the seven big U.S. liquefied natural gas (LNG) export plants rose to 13.6 bcfd so far in October, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)