US natural gas futures ease on technical selling

US natural gas futures dipped more than 1 percent to a two-week low on Friday on technical selling as strong production results in bigger-than-normal storage builds despite heavy cooling demand from power plants. Front-month gas futures on the New York Mercantile Exchange closed down 4 cents at $2.776 per million British thermal units.
After adding more gas into storage than usual last week, analysts forecast utilities would again inject more of the fuel than normal during the week ended July 24. In early estimates, analysts said this week's injection would reach 58 billion cubic feet (bcf). That compared with an actual injection of 68 bcf last week before a reclassification, 88 bcf a year earlier and a five-year average increase of 48 bcf.
The latest Global Forecast System weather model for the lower 48 US states projected temperatures would hold mostly steady at above-normal levels over the next two weeks, with 227 population-weighted cooling degree days (CDDs), the same as on Thursday. That compared with the 30-year norm of 201 CDDs. Thomson Reuters Analytics forecast consumption in the lower 48 states would average 61.7 billion cubic feet per day (bcfd) over the next two weeks. That compared with Thursday's forecast of 62.1 bcfd and a 30-year norm of 57.4 bcfd.
Power generators, the biggest gas user by far, were expected to use an average 33.8 bcfd of gas over the next two weeks, according to Thomson Reuters Analytics. That compared with 28.9 bcfd used a year earlier and a 30-year norm of 29.1 bcfd. With eastern coal futures up 6 percent since hitting their lowest level since 2007 in late June, the premium of gas futures over eastern coal futures fell below $1 per mmBtu for only the second time since early June, making it likely more generators will burn gas instead of coal.
In early estimates, gas production in the lower 48 states was expected to hold at 72.4 bcfd on Friday, the same as Thursday, according to Thomson Reuters Analytics. By comparison, production was 69.1 bcfd a year ago and a record high of 74.5 bcfd in December. Net imports from Canada were expected to fall to 4.8 bcfd on Friday, the least since May, from 5.0 bcfd on Thursday, while exports to Mexico were expected to hold at 3.2 bcfd on Friday, the same as Thursday.