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US Natural Gas Update: Futures Gain on Weak Storage Build and Hotter Forecasts

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US natural gas futures extended gains in after-hours trading on Thursday after government data showed a smaller-than-expected storage injection and weather forecasts turned warmer, boosting expectations for cooling demand heading into summer.

The front-month Henry Hub contract and the continuous contract both rose by 4.45%, to trade at $3.357 per million British thermal units.

Earlier on Thursday, the US Energy Information Administration reported that natural gas inventories increased by 95 billion cubic feet in the week ended May 29, below market expectations for a 99-105 Bcf build and under the five-year average injection of 101 Bcf for the period.

The smaller-than-expected storage build was viewed as supportive for prices, reinforcing concerns that inventories may not be replenishing as quickly as normal ahead of the peak summer demand season.

Despite the bullish weekly figure, total US gas inventories remained 5.7% above the five-year seasonal average, although they were down 0.8% from a year earlier.

"The market has become more sensitive to any sign that injections are not rebuilding inventories as quickly as normal heading into summer," Gelber & Associates said in a note following the storage report.

The firm added that while inventories remain above the five-year average, the surplus is manageable and increasingly dependent on how rapidly heat spreads across major demand centers and whether LNG feedgas demand strengthens as maintenance activity eases.

Weather forecasts also lent support to the market. According to Barchart, citing The Commodity Weather Group, forecast models shifted hotter on Thursday, with above-normal temperatures expected across the Midwest and Northeast through Jun. 13. The outlook is expected to lift cooling demand as air-conditioning usage rises in major population centers.

Barchart, citing BNEF data, reported Lower-48 natural gas demand at 68.9 Bcf/d on Thursday, up 0.2 Bcf/d from Wednesday but down 1.3% from a year earlier. Celsius Energy estimated power-sector gas consumption at 23.6 Bcf/d late Thursday, unchanged from the previous day but 1.2 Bcf/d below year-ago levels.

On the supply side, BNEF estimated Lower-48 dry gas production at 108.7 Bcf/d on Thursday, down 0.9 Bcf/d from the previous day but up 1.8% year over year.

Meanwhile, estimated net feedgas flows to US LNG export terminals rose to 17.4 Bcf/d on Thursday, up 0.4 Bcf/d from Wednesday, although flows remained 4.4% below the prior week's level due to ongoing maintenance.

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