US natural gas little changed on higher demand

US natural gas futures were little changed as forecasts for cooler weather and higher demand over the next two weeks offset a bigger-than-expected storage build and longer-range projects calling for demand destruction from the coronavirus outbreak.

The US Energy Information Administration (EIA) said utilities injected 38 billion cubic feet (bcf) of gas into storage during the week ended April 3.

That was much more than the 24-bcf build analysts forecast in a Reuters poll and compares with an increase of 25 bcf during the same week last year and a five-year (2015-19) average addition of 6 bcf for the period.

The increase for the week ended April 3 boosted stockpiles to 2.024 trillion cubic feet (tcf), 19.1% above the five-year average of 1.700 tcf for this time of year.

On the last day of trade before Good Friday and the Easter holiday weekend, front-month gas futures for May delivery on the New York Mercantile Exchange remained unchanged to $1.787 per million British thermal units at 10:47AM EDT/EST, or unchanged

Even before the coronavirus started to cut global economic growth and energy demand, gas was already trading near its lowest in years as record production and months of mild winter weather enabled utilities to leave more fuel in storage, making shortages and price spikes unlikely.

Analysts said steps to slow the spread of coronavirus reduced demand from commercial and industrial companies as offices closed and factories run at lower capacities. Electricity trade group Edison Electric Institute (EEI) said power demand fell last week to a 16-year low.

The EIA projected US gas consumption would fall to 83.79 billion cubic feet per day (bcfd) in 2020 and 81.24 bcfd in 2021 from a record 84.97 bcfd in 2019. That would be the first annual decline in consumption since 2017 and the first time demand falls for two consecutive years since 2006.

Looking ahead, however, gas futures for the balance of 2020 and calendar 2021 were trading much higher than the front month on expectations demand will jump in coming months as the economy recovers with the loosening of travel and work restrictions as the spread of the new coronavirus slows. Calendar 2021 has traded at a premium over 2022 for 20 days and over 2025 for 10 days.

In Texas, gas forwards for 2021 at the Waha hub in the Permian basin were trading at their highest levels in years, up from below zero now, on expectations gas supplies from oil drilling will drop as low crude prices prompt energy firms to cut rigs.

With cooler weather still coming, data provider Refinitiv projected gas demand in the US Lower 48 states, including exports, will rise from an average of 92.4 billion cubic feet per day (bcfd) this week to 98.7 bcfd next week. That is similar of Refinitiv's forecasts on Wednesday.