US natural gas rises to 1-month high on storage build near expectations

29 Aug, 2019

On its first day as the front-month, gas futures for October delivery rose 5.4 cents, or 2.4pc, to $2.276 per million British thermal units by 10:39 a.m. EDT (1439 GMT). Earlier, prices had touched their highest since Aug. 1 at $2.294.

The US Energy Information Administration (EIA) said utilities added 60 billion cubic feet (bcf) of gas into storage during the week ended Aug. 23.

That was mostly in line with a 57 bcf build that analysts forecast in a Reuters poll and compares with a five-year (2014-18) average build of 57 bcf for the period.

The increase last week boosted stockpiles to 2.857 trillion cubic feet (tcf), 3.4pc below the five-year average, but still 14.6pc above the same week a year ago.

Analysts said prices were being supported by lingering warmer weather conditions and some storm risk premium.

"Even though (Hurricane) Dorian does not seem to be headed to the production area, the high season of the tropical storms is almost here and the market may be expecting more and stronger storms," said Zhen Zhu, economist at Oklahoma City-based C.H. Guernsey.

However gas price movement is expected to be flat or even slightly downward in the next couple of months due to the absence of major bullish events, Zhu added.

Investors were keeping a close eye on Dorian, which took aim at the Florida coast early on Thursday, whipped up by warm Atlantic waters as it threatened to become a dangerous Category 3 storm.

Refinitiv data indicated 165 cooling degree days (CDDs) in the lower 48 states over the next two weeks. The normal is 147 CDDs for this time of year.

Meanwhile, gas production in the lower 48 US states fell to 90.8 billion cubic feet per day (bcfd) on Wednesday from 91.8 bcfd on Tuesday, Refinitiv data showed.

This compares to an all-time high of 92.5 bcfd scaled on Aug. 19.

Analysts said gas futures had traded near multi-year lows since May because record output and mild spring weather allowed utilities to inject huge amounts of gas into storage.

The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33pc below that average in March 2019.

But with production expected to keep growing, analysts said, stockpiles should reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season on Oct. 31.

Copyright Reuters, 2019

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