US natural gas futures on Friday climbed before an extended Memorial Day weekend on forecasts for warmer weather in two weeks that is expected to boost air conditioning demand. On its last day as the front month, futures for June rose 5.2 cents, or 1.6 percent, to settle at $3.236 per million British thermal units.
For the week, the front month ended little changed after falling about 5 percent in the prior week. The contract remained up about 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 71.0 billion cubic feet per day, compared with 71.8 bcfd during the same period in 2016 and 73.1 bcfd in 2015, Reuters data showed. Output has remained at its lowest since 2014 during the past five months. US exports were expected to reach 8.2 bcfd this week, up 41 percent from a year earlier, the data showed.
US gas consumption was projected to rise to 69.4 bcfd in two weeks from 66.7 bcfd this week, according to Reuters data. Analysts forecast utilities added 81 billion cubic feet of gas into storage during the week ended May 26, leaving inventories about 10 percent above normal for this time of year. That compares with an increase of 80 bcf a year earlier and a five-year average build of 97 bcf for that period.
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 but less than in 2016. However, some of that increased demand could go to coal, which has cost about the same as gas since the start of May.
Regardless of which fuel power generators use this summer, analysts forecast gas 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. Traders said that the possibility of normally cold weather next winter after two unusually mild seasons have prompted money managers to boost bullish bets to their highest in four years.
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