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US Natural Gas Update: Futures Edge Higher as Lower Output Offsets Ample Supply

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US natural gas futures inched higher in midday trading on Friday as lower production helped counterbalance still-loose fundamentals across the market.

Both the front-month Henry Hub contract and the continuous contract rose 0.14% to $2.77 per million British thermal units.

Trading was volatile through the session, with prices ranging from a low of $2.746 to a high of $2.821/MMBtu. The market followed Thursday's 4% gain made after the weekly storage build came in smaller than feared.

Supply-side support came from reduced output. US natural gas production held broadly steady at lower levels over the past week, averaging about 106.4 billion cubic feet per day, according to NRG Energy.

Weak regional pricing and an unusually warm April prompted producers, particularly in the Appalachian basin, to scale back activity, Bloomberg reported. Despite recent softness, total US output on Friday was still estimated at 109.7 Bcf per day, up 3.1% over the year.

Demand showed modest improvement over the week, averaging roughly 104.2 Bcf/d. NRG said gains were driven by stronger power-sector burn late in the period, while earlier-week softness partially offset the increase.

Bloomberg data showed Lower-48 demand at 70.8 Bcf/d on Friday, up 5.6% from a year earlier. Weather-driven demand is expected to firm a bit into mid-May, with below-average temperatures forecast across the eastern US through May 10, according to Commodity Weather Group data cited by Bloomberg.

LNG feedgas demand eased slightly, averaging around 18.4 Bcf/d over the week, down from earlier highs in the upper-18 Bcf/d range and slipping into the mid-17 Bcf/d area by April 30, NRG said. Bloomberg pegged Friday flows at 19.1 Bcf/d, down 2.7% from the previous week, citing continued lower volumes at the Cameron LNG terminal in Louisiana.

Despite minor production declines and stable demand growth, overall fundamentals remained loose. That imbalance continued to support above-average storage builds.

The US Energy Information Administration reported a 79 Bcf injection into the inventory on Thursday, well above the five-year average increase of 63 Bcf. Stockpiles now sit 8% above the five-year norm and 6% higher than a year ago.

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