US natural gas futures fall on lower demand

US natural gas futures fell on Tuesday, hurt by milder weather forecasts and lower demand next week as well as small, but steady increases in production. Front-month gas futures fell 11.1 cents, or 3.3 percent, to settle at $3.219 per million British thermal units. That was the biggest percentage decline in a week.
Despite the loss, the contract was still up 28 percent from an eight-month low of $2.522 set in February. Investors see a possible price spike later this year if low output and mounting sales abroad leave inventories unusually low before next winter. Over the past 30 days, gas production has averaged 70.9 billion cubic feet per day, its lowest level in three years. That compares with 71.9 bcfd during the same period in 2016 and 73.2 bcfd in 2015. Since the start of the year, output has averaged 2.3 bcfd below the same period in 2016.
US exports were expected to reach 8.4 bcfd this week, up 45 percent from a year earlier, according to Reuters data. Analysts forecast utilities added 77 billion cubic feet of gas into storage during the week ended May 19. That compares with an increase of 71 bcf a year earlier and a five-year average build of 90 bcf for that period. If correct, the build would leave inventories about 11 percent above normal for this time of year.
US gas consumption was projected to fall to 66.5 bcfd next week from 67.8 bcfd this week as temperatures creep higher, cutting the amount of gas homes and businesses use for heat, the data showed. Meteorologists forecast this summer will be slightly warmer-than-normal but not quite as hot as last year, prompting expectations power generators will use a little more gas than usual.
However, some of that increased demand could go to coal since both fuels have cost about the same in recent weeks. Regardless of which fuel power generators use this summer, analysts forecast inventories will rise by only 1.6 trillion cubic feet during the April-October injection season. That build, which is far below the five-year average of 2.1 tcf, would put storage at just 3.7 tcf at the end of October, well below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf.