U.S. natural gas futures rise to 29-month high on small storage build

U.S. natural gas futures rose over 2% to a 29-month high on Thursday on a smaller-than-expected storage build, forecasts for hotter weather over the next two weeks, rising exports and projections for power demand in Texas to reach record highs for June.

The U.S. Energy Information Administration (EIA) said utilities added 55 billion cubic feet (bcf) of gas into storage during the week ended June 18.

That is lower than the 66-bcf build analysts forecast in a Reuters poll and compares with an increase of 115 bcf in the same week last year and a five-year (2016-2020) average increase of 83 bcf.

Analysts expected a low storage build last week because power generators burned lots of gas to keep air conditioners humming during heat waves in the Southwest.

Last week's build boosted U.S. stockpiles to 2.482 trillion cubic feet (tcf), or 5.8% below the five-year average of 2.636 tcf for this time of year.

Front-month gas futures rose 7.5 cents, or 2.3%, to $3.408 per million British thermal units by 12:02 p.m. EDT (1602 GMT), putting the contract on track for its highest close since January 2019.

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 in November 2019.

With the coming of hotter summer weather, Refinitiv projected average gas demand, including exports, would rise from 88.2 bcfd this week to 93.1 bcfd next week. Those forecasts were similar to Refinitiv's projections on Wednesday.

The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants fell to 9.9 bcfd so far in June due mostly to short-term maintenance outages at Gulf Coast facilities and the pipelines that supply them with fuel. That compares with averages of 10.8 bcfd in May and a record 11.5 bcfd in April.

But with European and Asian gas both trading over $11 per mmBtu, analysts said they expect buyers around the world to keep purchasing all the LNG the United States can produce.

The Title Transfer Facility (TTF) in the Netherlands, the European gas benchmark, was at its highest since January 2014.

U.S. pipeline exports to Mexico averaged 6.8 bcfd so far in June, putting them on track to top May's 6.2-bcfd record.

In the power market, peak demand in the Electric Reliability Council of Texas (ERCOT), which operates the power grid in most of Texas, soared to a record for the month of June of 69,943 megawatts (MW) on June 14 during a brutal heat wave.

ERCOT projected demand would break that June record on Thursday at 71,338 MW and Friday at 71,402 MW.

That compares with the grid's all-time high of 74,820 MW in August 2019.