US natural gas futures fell nearly 3 percent on technical selling and increased production despite a smaller-than-expected storage build and forecasts for stronger cooling demand. The US Energy Information Administration said utilities added 89 billion cubic feet of gas into storage during the week ended June 12, a little less than the 93 bcf analysts estimated in a Reuters poll.That compared with builds of 111 bcf in the prior week, 112 bcf a year earlier and a five-year average increase of 87 bcf.
Front-month gas futures on the NYMEX closed down 7.8 cents at $2.777 per million British thermal units. That decline cut the premium of gas futures over coal futures to under $1.10 per mmBtu for the first time in four trading days, pushing some generators to burn gas instead of coal. Traders said pressure from relatively low gas prices pushed coal futures to their lowest since 2007 for a fourth day in a row. Gas futures so far in 2015 have traded at their lowest levels since 2012.
In technical news, the 50-day moving average was close to breaking over the 100-day for the first time since December. The so-called golden cross is usually a bullish signal. Thomson Reuters Analytics said it expected production to rise to 71.1 billion cubic feet per day in the lower 48 on Thursday from 70.8 bcfd on Wednesday, the lowest since October. That compared with 68.6 bcfd a year ago and a record high of 74.5 bcfd in December.
The Global Forecast System weather model for the lower 48 US states called for warmer, above-normal temperatures over the next two weeks, with 191 population-weighted cooling degree days. That compared with 184 CDDs on Wednesday and a 30-year norm of 167 CDDs.
With the warmer weather, Thomson Reuters Analytics forecast consumption in the lower 48 would average 58.7 bcfd over the next two weeks, compared with Wednesday's outlook of 58.5 bcfd and a 30-year norm of 54.1 bcfd. Despite the warm weather, residential, commercial and industrial customers were expected to continue using less gas than usual. Power generators, however, kept burning more of the fuel because of its relatively low cost compared with coal. Power generators, meanwhile, were expected to use an average of 30.9 bcfd of gas over the next two weeks. That compared with 26.3 bcfd a year earlier and a 30-year norm of 25.8 bcfd.