US natgas futures hit 2-month high ahead of storage report

US natural gas futures rose to a two-month high on Thursday ahead of a federal report expected to show a smaller-than-usual storage build last week.

Traders noted the advance came on forecasts the weather will remain hotter-than-normal for the next two weeks, keeping air conditioning demand high.

Analysts said US utilities likely injected 58 billion cubic feet (bcf) of gas into storage during the week ended July 3. That compares with an increase of 83 bcf during the same week last year and a five-year (2015-19) average build of 68 bcf for the period.

If correct, the increase would bring stockpiles to 3.135 trillion cubic feet (tcf), 17.0% above the five-year average of 2.679 tcf for this time of year. By the end of the injection season in October, analysts expect US inventories will reach a record high near 4.1 tcf.

Front-month gas futures rose 5.4 cents, or 3.0%, to $1.878 per million British thermal units at 10:06 a.m. EDT (1406 GMT). If the contract closes at that level it would be its highest settle since May 7.

Refinitiv said production in the Lower 48 US states averaged 88.1 billion cubic feet per day (bcfd) so far in July, up from a 20-month low of 87.0 bcfd in June but still well below the all-time monthly high of 95.4 bcfd in November.

As the weather heats up, Refinitiv forecast US demand, including exports, will rise from 89.2 bcfd this week to 90.7 bcfd next week.

Pipeline gas flowing to US LNG export plants averaged just 3.1 bcfd (32% utilization) so far in July, down from a 20-month low of 4.1 bcfd in June and a record high of 8.7 bcfd in February. Utilization was about 90% in 2019. Flows to Freeport LNG in Texas fell to zero for a third day in a row the first time since July 2019 when its first liquefaction train was still in test mode.