U.S. natural gas futures fell more than 3% from a near five-month high on Thursday following the release of a report showing a bigger-than-expected storage build.
The U.S. Energy Information Administration (EIA) said utilities added 84 billion cubic feet (bcf) of gas to storage during the week ended Sept. 13.
That was higher than the 78-bcf build analysts forecast in a Reuters poll and compares with an injection of 84 bcf during the same week last year and a five-year (2014-18) average build of 82 bcf for the period.
Last week’s increase boosted stockpiles to 3.103 trillion cubic feet (tcf), 2.4% below the five-year average of 3.178 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 much as 33% below that average in March 2019. But with production near a record high, 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 8.4 cents, or 3.2%, at $2.553 per million British thermal units (mmBtu) at 10:46 a.m. EDT (1446 GMT). On Monday, the contract closed at $2.681, its highest since April 10.
Before the EIA released the storage report, the front-month was already down 1.7% on forecasts for less cooling demand next week than previously expected.
Prior to the latest price drop, the contract had traded in technically overbought territory for 12 days in a row and was up around 30% over a three-year low of $2.029 per mmBtu on Aug. 5 as warmer than normal weather caused power generators to burn more gas than usual to keep air conditioners humming.
Traders, however, noted warmer than normal weather in late September is a lot cooler than in the middle of the summer and soon, if that warm weather persists, it will no longer cause consumers to crank up their air conditioners but lead them to leave their heaters off, which will reduce demand for gas.
In Texas, the remnants of Tropical Storm Imelda were causing flooding in the Houston area. That flooding caused Exxon Mobil Corp to shut the Beaumont oil refinery in Texas, but so far has caused only minimal power outages.
As the weather cools with the coming of autumn, data provider Refinitiv projected average demand in the lower 48 U.S. states will drop from 85.3 billion cubic feet per day (bcfd) to 81.9 bcfd next week. That forecast for next week’s demand is lower than Refinitiv’s 82.6 bcfd outlook on Wednesday.
U.S. gas exports, meanwhile, are expected to rise over the next two weeks – just not as fast as power generators cut back on the amount of fuel they burn.
Gas flows to U.S. liquefied natural gas (LNG) export plants held at 6.5 bcfd on Wednesday, up from an average of 6.1 bcfd last week, according to Refinitiv data.
Refinitiv projected flows to LNG terminals could rise to a record high 6.8 bcfd next week.
Exports to Mexico held around 5.1 bcfd this week even though flows through the 2.6-bcfd Valley Crossing and Sur de Texas-Tuxpan pipes started after TC Energy Corp and Sempra’s IENOVA unit resolved pipeline contract disputes with Mexico’s Federal Electricity Commision in late August.
Traders said they expect pipeline exports to Mexico to rise over the next few weeks after Kinder Morgan Inc’s Gulf Coast Express pipe from the Permian basin to the Texas Gulf Coast enters service in late September/early October.
Gas production in the lower 48 states edged up to 91.5 bcfd on Wednesday from 91.3 bcfd on Tuesday, according to Refinitiv data. That compares with an all-time daily high of 93.0 bcfd on Aug. 19.