NEW YORK: US natural gas futures collapsed over 7% to a near 25-year low on Thursday as demand destruction from the coronavirus left the world awash in the fuel that utilities have squeezed into storage caverns expected to be full by the end of the summer season.
The US Energy Information Administration said US utilities injected 120 billion cubic feet (bcf) of gas into storage during the week ended June 19.
That was much bigger than the 106-bcf build analysts forecast in a Reuters poll and compares with an increase of 103 bcf during the same week last year and a five-year (2015-19) average build of 73 bcf for the period. Analysts said much of the surplus gas came from the cancellation of dozens of US liquefied natural gas (LNG) cargoes in recent weeks.
The storage increase boosted stockpiles to 3.012 trillion cubic feet (tcf), 18.3% above the five-year average of 2.546 tcf for this time of year. By the end of the injection season in October, analysts expect US inventories will reach a record 4.1 tcf.
On its second-to-last day as the front-month, gas futures for July delivery fell 11.5 cents, or 7.2%, to settle at $1.482 per million British thermal units (mmBtu), their lowest since August 1995.
August futures, which will soon be the front-month, fell almost 12 cents to $1.55 per mmBtu.
Stockpiles are filling despite a drop in output this year. Refinitiv said production in the Lower 48 US states averaged 87.5 billion cubic feet per day (bcfd) in June, down from a 16-month low of 87.9 bcfd in May.
Analysts at Goldman Sachs boosted their end of season storage forecasts and cut their price forecasts for later in 2020 as LNG cancellations added more gas to US stockpiles than the bank projected previously. Goldman forecast US LNG exports would bottom at 4.0 bcfd in June before rising to record highs over 10.0 bcfd in November and December.
The amount of pipeline gas flowing to US liquefied natural gas export plants dropped to an average of 4.1 bcfd (42% utilization) in June, according to Refinitiv data, down from an eight-month low of 6.4 bcfd in May and a record high of 8.7 bcfd in February. Utilization was about 90% in calendar 2019.
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