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US Natural Gas Update: Futures Edge Down to 3-Week Low on Bearish Storage Data, Easing Demand

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US natural gas futures declined in midday trade on Friday, after the front-month contract touched a three-week low, pressured by a larger-than-expected weekly storage build and forecasts for moderating temperatures that are expected to curb power-sector gas demand.

The front-month Henry Hub contract and the continuous contract each eased by 0.88% to $2.808 per million British thermal units.

US average temperatures were around 76 degrees Fahrenheit on Friday and are forecast to decline steadily over the next two weeks, falling below 70 degrees by the end of the period, Aegis Hedging said, citing Criterion data.

Without a late-September or early-October heat wave, power demand is expected to decline alongside temperatures, making additional days with power-sector gas demand above 50 billion cubic feet per day unlikely for the rest of the year, Aegis said.

Even while the southern US remained hot, power burn fell by 3.5 Bcf per day to 46.8 Bcf/d as temperatures moderated across the northern US, Gelber & Associates reported.

In the export market, US LNG export activity continued to provide support to domestic gas demand. For the week ended Sep. 9, LNG-carrying capacity on vessels departing US ports totaled 137 Bcf across 36 vessels, up from 127 Bcf across 33 vessels the previous week, the US Energy Information Administration said Thursday.

On the supply side, natural gas production remained elevated at 112.7 Bcf/d, keeping supply ample despite Canadian imports falling to a two-week low of 4.4 Bcf/d, Gelber said.

The EIA reported a 40 Bcf injection into underground storage for the week ended Sep. 4, generally larger than market expectations but below the five-year average increase of 52 Bcf and last year's 69 Bcf build.

Working gas in storage stood at 3,254 Bcf, or 5% above the five-year average but 79 Bcf, or 2% below year-earlier levels.

The EIA said the average rate of net injections into storage was 7% above the five-year average at this point in the refill season, which ends next month.

It said that if injections continue at the five-year average rate of 11 Bcf/d for the remainder of the refill season, inventories would reach 3,901 Bcf by Oct. 31. That would be 148 Bcf above the five-year average of 3,753 Bcf at the end of the official refill season.

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