US natural gas futures extended gains on Thursday after soaring over 4% on Wednesday from a three-year low as meteorologists continued to forecast the weather would remain warmer than normal through mid August, which should keep air conditioning use high. Those price gains, which caused volume in front-month trade on the New York Mercantile Exchange (NYMEX) to hit a record high on Wednesday, comes despite expectations a federal report on Thursday will show utilities injected more gas into storage than usual last week as production remains near all-time highs.
Analysts said utilities likely added 52 billion cubic feet (bcf) of gas into storage during the cooler-than-normal week ended July 26. That compares with increases of 31 bcf during the same week last year and a five-year (2014-18) average build of 37 bcf for the period. If correct, that increase would boost stockpiles to 2.621 trillion cubic feet (tcf), 4.8% below the five-year average of 2.752 tcf for this time of year.
The US Energy Information Administration will release its weekly storage report at 10:30 am EDT (1430 GMT) on Thursday. The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33% below that average in March 2019. But with production near record highs, analysts expect stockpiles will reach a near-normal 3.7 tcf by the end of the summer injection season on October 31.
Front-month gas futures for September delivery on the NYMEX were up 6.9 cents, or 3.1%, to $2.302 per million British thermal units at 9:25 am EDT. On Wednesday, the contract jumped 4.5% from its $2.137 close on Tuesday, which was its lowest settle since May 26, 2016. The sharp price rise on Wednesday caused trade in the front-month to leap to an all-time daily high of 472,256 contracts, easily topping the prior record of 400,613 on March 28, 2018.
In addition, the premium of futures for October over September fell to just 0.3 cents per mmBtu, their lowest on record since the contracts started trading in 2008, according to Refinitiv Eikon data. Refinitiv projected demand in the Lower 48 US states would rise to an average of 91.3 billion cubic feet per day (bcfd) next week from 90.6 bcfd this week as power generators burn more fuel to meet higher air conditioning use and more gas flows to the nation's LNG export terminals.
The power sector in the Lower 48 states alone burned a record 40.5 bcfd of gas on average in July, according to Refinitiv data. That easily tops the prior monthly record for the entire country of 39.9 bcfd in July 2018, according to federal data. The amount of gas flowing to LNG export terminals held around 6.0 bcfd over the past couple of days, up from a low of 5.7 bcfd last week, according to Refinitiv data. That compares with a daily record high of 6.4 bcfd on July 19.
Analysts expect LNG exports to rise to new records soon as new units enter service at Sempra Energy's Cameron in Louisiana, Freeport LNG's Freeport in Texas and Kinder Morgan Inc's Elba in Georgia.
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