US natural gas futures rebounded from a two-week low in after-hours trade on Thursday, supported by short covering and strength across crude oil and European natural gas markets, despite an unexpectedly large weekly inventory build reported by the US Energy Information Administration.
The front-month Henry Hub contract and the continuous contract each rose 0.64% to settle at $2.840 per million British thermal units.
The October contract fell as low as $2.753/MMBtu after the EIA reported a 40 billion cubic feet increase in US natural gas inventories for the week ended Sept. 4. Prices subsequently recovered and moved into positive territory in later trading.
Natural gas futures gained alongside crude oil and European gas prices, which surged on Thursday as escalating US-Iran hostilities heightened concerns about prolonged disruptions to global energy supplies. European gas prices also remained supported by inventories that were substantially below year-ago levels and historical averages.
In the US, persistent warm weather provided additional support. Barchart, citing Commodity Weather Group forecasts, said above-average temperatures were expected across the South and Southeast through Sept. 19. NatGasWeather.com also forecast strong gas demand over the next seven days, with persistent heat in the South and temperatures exceeding 100 degrees Fahrenheit in some areas.
The broader market, however, expects cooling demand to decline steadily from the second half of September as temperatures moderate with the transition into autumn.
US natural gas demand stood at 79.4 Bcf on Thursday, more than 14% above the level recorded at the same time last year, according to data cited in the market.
Power demand has also remained elevated. The Edison Electric Institute said total US electricity output rose 19.69% year-on-year to 100,302 gigawatt-hours in the week ended Sept. 5. Generation over the 52 weeks ended Sept. 5 increased 3% from a year earlier to 4,392,478 GWh.
Despite the supportive weather and broader energy-market gains, natural gas futures initially declined after the EIA inventory report.
Despite being larger than expected, the 40-Bcf storage build was below the five-year average increase of 52 Bcf for the week. Total working gas in storage stood at 3,254 Bcf, or 148 Bcf, or 4.9%, above the five-year average for this time of year. The smaller-than-average injection narrowed the storage surplus to the five-year norm compared with the previous week.
Strong US production continues to keep inventories well supplied. US dry gas production was estimated at 113.4 Bcf per day on Thursday, up 3.7% from the same period a year earlier, Barchart said, citing BNEF data.
Trading Economics said US natural gas output averaged 112.9 Bcf/d during the first 10 days of September, remaining above August's record monthly average.
Meanwhile, estimated net flows of natural gas to US LNG export terminals totaled 19.7 Bcf/d on Thursday, up more than 3% from the previous week, indicating continued strong demand from the LNG export sector.