U.S. natural gas futures climbed about 4% on Thursday, a day after dropping to a 10-week low on a much smaller-than-expected storage build last week.
Prices were also boosted by forecasts for hot weather to return in late July and early August, which should increase the amount of gas power generators burn to keep air conditioners humming.
The U.S. Energy Information Administration (EIA) said utilities added just 10 billion cubic feet (bcf) of gas into inventories during the week ended July 12. Traders noted energy firms pulled gas out of Salt and Non-Salt storage facilities in the South Central region last week to feed power generator demand for the fuel to keep air conditioners humming.
That 10-bcf build was well below the 27-bcf build analysts forecast in a Reuters poll and compares with an increase of 43 bcf in the same week last year and a five-year (2019-2023) average rise of 49 bcf for this time of year.
Traders noted that storage builds have been smaller than usual in nine of the past 10 weeks because several producers cut output earlier in the year after futures prices dropped to 3-1/2-year lows in February and March. Higher prices in April and May, however, prompted some drillers, including EQT (EQT.N) and Chesapeake Energy (CHK.O), to return to the well pad.
Despite the declining builds, gas stocks were still about 17% above normal for this time of year.
Front-month gas futures for August delivery on the New York Mercantile Exchange rose 9.0 cents, or 4.4%, to settle at $2.125 per million British thermal units.
On Wednesday, the front-month fell about 7% and closed at its lowest level since May 2 on forecasts for cooler weather over the next two weeks than previously expected and a drop in feedgas to liquefied natural gas (LNG) export plants due primarily to the shutdown of Freeport LNG in Texas for Hurricane Beryl. Freeport started pulling in small amounts of feedgas this week as it slowly returns to service.
The price increase on Thursday pushed the front-month out of technically oversold territory for the first time in four days.
In other news, the U.S. Energy Information Administration (EIA) revised peak hourly power demand on Monday down to 738,596 megawatts (MW), which would not break the prior all-time high of 742,600 MW set on July 20, 2022 as projected earlier this week, and would only be the highest since usage peaked at 741,815 MW on July 27, 2023.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 102.2 bcfd so far in July, up from an average of 100.1 bcfd in June and a 17-month low of 99.4 bcfd in May. U.S. output hit a monthly record high of 105.5 bcfd in December 2023.
Meteorologists projected weather across the Lower 48 states would remain mostly near normal through July 25 before turning hotter than normal through at least Aug. 2.
With less hot weather expected in the coming week, LSEG forecast average gas demand in the Lower 48, including exports, will slide to 103.6 bcfd next week from 105.6 bcfd this week.
Gas flows to the seven big U.S. LNG export plants fell to 11.6 bcfd so far in July due mostly to the Freeport outage, down from 12.8 bcfd in June and a monthly record high of 14.7 bcfd in December 2023.
