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US Natural Gas Update: Futures Climb on Small Inventory Build, Increased Cooling Demand Forecasts

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US natural gas futures rose in after-hours trade on Thursday due to a smaller-than-expected storage build and supportive weather forecasts.

Front-month Henry Hub futures and the continuous contract both rose by 1.96% to $2.92 per million British thermal units.

The US Energy Information Administration reported an 85 Bcf increase in natural gas storage for the week ending May 8. The weekly inventory build was smaller than some forecasts as high as 91 Bcf, but largely in line with most analyst forecasts of an 84-87 Bcf build and close to the five-year average injection of 84 Bcf.

Total working gas in storage climbed to 2,290 Bcf, with the surplus versus the five-year average holding near 140 Bcf. Inventories are now about 2.3% above year-ago levels and roughly 6.5% above seasonal averages, according to Trading Economics. By comparison, the same week last year recorded a larger storage injection of 109 Bcf.

Weather forecasts also supported prices. Barchart, citing The Commodity Weather Group, said Thursday that forecasts turned warmer, with above-normal temperatures expected across the Midwest through May 18. The warmer outlook could lift natural gas demand from power utilities as air-conditioning use increases.

Gelber & Associates said the latest forecast shift provides enough support for cooling demand to keep the market attentive to power-sector consumption, though not enough on its own to make the near-term decisively tight.

BNEF data, cited by Barchart, showed US gas production fell to 107.6 Bcf/d on Thursday, down 2.2 Bcf/d from Wednesday, but up 1% from a year earlier.

Lower-48 gas demand rose 3.7% year over year to 68.2 Bcf/d, up 400 million cubic feet per day from Wednesday.

Feedgas flows to US LNG export terminals came in at 17.5 Bcf/d Thursday, down 1.8% from the prior week, but up 200 MMcf/d on the day. Gelber & Associates said "LNG remains the key swing factor outside of domestic weather, but net export demand is still running below recent monthly levels, and the market is waiting for fuller LNG service to restore a cleaner pull on feedgas."

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