U.S. natural gas futures fell almost 2% from a seven-week high last Thursday following the release of a bigger than expected weekly storage build and a projected decline in the amount of gas flowing to liquefied natural gas (LNG) export plants.
The U.S. Energy Information Administration said utilities added 84 billion cubic feet (bcf) of gas into storage during the week ended Aug. 30.
That is higher than the 78-bcf build analysts forecast in a Reuters poll and compares with an injection of 64 bcf during the same week last year and a five-year (2014-18) average build of 66 bcf for the period.
Last week’s increase boosted stockpiles to 2.941 trillion cubic feet (tcf), 2.7% below the five-year average of 3.023 tcf for this time of year.
The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33% below that average in March 2019. But with production expected to keep growing, analysts said, stockpiles should reach a near-normal 3.7 tcf by the end of the summer injection season on Oct. 31.
Front-month gas futures for October delivery on the New York Mercantile Exchange were down 4.2 cents, or 1.7%, to $2.403 per million British thermal units at 10:39 a.m. EDT (1439 GMT). On Wednesday, the contract closed at its highest level since July 12.
Before EIA released the storage report, the front-month was down 0.6%.
Despite the decline, the contract remained in overbought territory for a third day in a row for the first time since November 2018.
Spot power prices in Texas, meanwhile, soared to a record high for Thursday as consumers cranked up their air conditioners to escape another brutal heat wave. Meteorologists forecast temperatures in Texas and the U.S. Southeast will remain higher than normal through mid-September.
Even though that heat is expected to keep power generator demand for gas high, data provider Refinitiv pared its projection for average gas use in the Lower 48 U.S. states for next week from 85.5 billion cubic feet per day (bcfd) on Wednesday to 85.3 bcfd on Thursday due to an expected decline in flows to LNG export terminals.
Gas flows to U.S. LNG export plants slipped to a two-week low of 5.4 bcfd on Wednesday due to planned maintenance on Train 5 at Cheniere Energy Inc’s Sabine Pass facility in Louisiana, down from a record high of 6.8 bcfd last week.
Kinder Morgan Inc said it halted the startup process of its Elba LNG export plant in Georgia following mandatory evacuation orders as Hurricane Dorian approached.
Stunned residents of the Bahamas surveyed the wreckage of their homes and officials struggled to assess the number killed by Dorian, as the storm bore down on the South Carolina coast, threatening record flooding on Thursday.
More than 210,000 homes and businesses were without power in South Carolina and Georgia early Thursday as Dorian lashed the region, according to local electric companies.
Gas production in the Lower 48 states, meanwhile, slipped to 91.7 bcfd on Wednesday from 92.7 bcfd on Tuesday, according to Refinitiv. That compares with an all-time high of 93.0 bcfd on Aug. 19.