U.S. natural gas flat as small storage build offsets milder forecasts

U.S. natural gas futures were little changed on Thursday as a smaller than expected storage build offset forecasts for less hot weather over the next two weeks following heatwaves in Texas and California this week.

Those heatwaves caused some power prices in the U.S. West to hit multiyear highs and boosted power demand in Texas to a June record as homes and businesses cranked up their air conditioners.

The U.S. Energy Information Administration (EIA) said utilities added 67 billion cubic feet (bcf) of gas into storage during the week ended June 11. Analysts said that was smaller than usual because the weather last week was warmer than normal and exports to Mexico were at record highs.

That was lower than the 72-bcf build analysts projected in a Reuters poll and compares with an increase of 87 bcf in the same week last year and a five-year (2016-2020) average increase of 86 bcf.

Last week's injection, which included a reclassification of 51 bcf of working gas (gas that can be used) into base gas (gas left in storage to maintain pressure) by PG&E Corp in California, boosted stockpiles to 2.427 trillion cubic feet (tcf). That is 4.9% below the five-year average of 2.553 tcf for this time of year.

Front-month gas futures rose 0.2 cents, or 0.1%, to settle at $3.253 per million British thermal units.

Data provider Refinitiv said gas output in the Lower 48 U.S. states averaged 91.6 billion cubic feet per day (bcfd) so far in June, up from 91.0 bcfd in May but still well below the monthly record high of 95.4 bcfd recorded in November 2019.

Despite forecasts for a gradual increase in average nationwide temperatures in coming weeks, Refinitiv projected average gas demand, including exports, would slip from 89.5 bcfd this week to 87.8 bcfd next week as power generators burn more coal and less gas to keep air conditioners humming.

The amount of gas flowing to U.S. LNG export plants slid to an average of 9.7 bcfd so far in June, down from 10.8 bcfd in May and an all-time high of 11.5 bcfd in April.

Traders noted LNG feedgas was down due to short-term maintenance at the Sabine Pass and Cameron export plants in Louisiana and some of the pipelines that provide them with fuel.

But with European and Asian gas prices both trading over $10 per mmBtu earlier this week, analysts said they expect buyers around the world to keep purchasing all the LNG the United States can produce.

U.S. pipeline exports to Mexico averaged 6.6 bcfd so far in June, putting them on track to top May's 6.2-bcfd record.