US natgas falls over 5pc on milder weather outlook

US natural gas futures fell over 5% on Thursday on forecasts power generators will burn less gas next week as cooling demand drops with the coming of milder weather despite a small weekly storage build that was in line with expectations.

The US Energy Information Administration said utilities injected just 26 billion cubic feet (bcf) of gas into storage in the week ended July 24, when consumers were still cranking up their air conditioners to escape a heat wave that has blanketed much of the country since late June.

That matches the 26-bcf build analysts forecast in a Reuters poll and compares with an increase of 56 bcf during the same week last year and a five-year (2015-19) average build of 33 bcf.

But with the weather expected to turn cooler in coming weeks, analysts said utilities would start injecting more gas into storage than usual and inventories will reach a record high over 4.1 tcf by the end of the injection season in October.

On its first day as the front-month, gas futures for the most active September contract fell 10.1 cents, or 5.2%, to settle at $1.829 per million British thermal units.

Even though gas futures were only up about 1% so far this week, the contract has been volatile in intraday trade after falling over 5% on Monday and rising over 5% on Wednesday.

The premium of the October contract over September , meanwhile, rose to its highest on record as the market expects energy demand to rise as the economy rebounds later this year when governments lift coronavirus lockdowns.

With the weather expected to moderate, Refinitiv projected US demand, including exports, will drop from 92.3 billion cubic feet per day (bcfd) this week to 89.3 bcfd next week.