US natural gas futures fell 2 percent in the last day of trading for the September contract as forecasts of warmer temperatures were offset by a government report that showed larger-than-expected builds in weekly storage. The US Energy Information Administration reported 69 billion cubic feet of natural gas into storage for the week ended August 14, more than the 59 bcf expected in a Reuters poll of analysts.
Stocks were 480 bcf higher than last year at this time and 88 bcf above the five-year average of 3,011 bcf, according to the EIA. Front-month gas futures settled 5.5 cents, or 2 percent, lower at $2.638 per million British thermal units on the New York Mercantile Exchange. Prices fell by nearly 2 percent shortly after the report was released before climbing to a daily high of $2.696. But prices fell in the late afternoon as traders settled their expiring September contracts.
The midday rally was a sign that traders were willing to shrug off the supply report, expecting the summer weather to extend deeper into September. "This supply overage appears insufficient to spur sustained selling without assistance from some cooling temperature trends," Ritterbusch & Associates said in a note Thursday. "For the time being, these expectations favor the bullish camp with much above normal temperatures spread across the eastern half of the US well into the second week of September." The latest Global Forecast System weather model projected 178.9 population-weighted cooling degree days (CDDs) over the next two weeks for the lower 48 US states, warmer than Thursday morning's forecast of 172.1 CDDs.
Thomson Reuters Analytics forecast that consumption in the lower 48 states would average 59.1 bcf per day over the next two weeks, slightly higher than the earlier projection of 58.5. Traders were also eyeing Tropical Storm Erika, which continued to strengthen as it dumped torrential rain on the Eastern Caribbean and appeared to be headed for the US East Coast early next week, the National Hurricane Center said. Erika could reach hurricane status near Florida's east coast by Monday morning, the Miami-based government forecaster said. Hurricanes can affect offshore US oil and gas production if they head into the Gulf of Mexico.