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US Natural Gas Update: Futures Fall After 41 Bcf Storage Build

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US natural gas futures prices fell sharply in midday trading Thursday after government data showed a 41 billion cubic foot increase in inventories, reinforcing concerns that supply continues to outpace demand.

The front-month Henry Hub contract and the continuous contract each declined 2.70% to $2.845 per million British thermal units.

The US Energy Information Administration said natural gas inventories totaled 3,024 Bcf for the week ended July 10, up 41 Bcf from the previous week. Stocks were 21 Bcf below year-ago levels but 181 Bcf above the five-year average of 2,843 Bcf.

Analysts' expectations ranged from a 36-45 Bcf build, while the five-year average was a 45 Bcf increase for the week.

Gelber & Associates said the EIA report came in above its 36 Bcf forecast, prompting a quick market reaction.

"Henry Hub was trading near $2.94/MMBtu heading into the morning release and slipped to $2.84 in the minutes after, as the bigger injection reinforced the view that supply continues to outrun demand even with summer cooling load still running strong," Gelber analysts said.

The firm added that robust production and a recovering LNG sector have kept market focus on supply length rather than emerging tightness.

NatGasWeather.com said most of the US will remain very warm to hot in the coming days, with highs in the upper 80 degrees Fahrenheit to triple digits and widespread 90s across major cities in the Midwest and East Coast.

The Northeast is expected to cool Saturday through Wednesday, with national demand forecast to remain high over the next three days before easing to moderate-high levels.

Trading Economics said Lower 48 gas production rose to 110.2 Bcf per day in July from 110 Bcf/d in June, while near-record solar and wind generation has reduced gas-fired power demand.

On the export side, Gelber said the ongoing Freeport LNG turnaround remains a key market factor, with an estimated 25-30 Bcf impact before a late-August return to full service. The firm also said LNG feedgas demand is somewhat recovering as Sabine Pass returns from maintenance.

NRG Energy said LNG feedgas demand increased 0.7 Bcf/d to 16.5 Bcf/d on Thursday.

"Between a storage figure that leaned bearish and a supply and demand picture still dominated by ample production and gradually recovering exports, the path of least resistance for Henry Hub has tilted lower," Gelber said.

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