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US Natural Gas Update: Prices Recover from Dip Caused by Large Inventory Build

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US natural gas futures rebounded by midday Thursday after briefly slipping into negative territory following a larger-than-expected storage build reported by the US government.

The front-month Henry Hub contract and the continuous futures benchmark were both up 1.99% at $3.285 per million British thermal units.

The US Energy Information Administration said natural gas inventories in underground storage increased by 76 billion cubic feet to 2,835 Bcf in the week ended June 19. The build exceeded analysts' expectations for an increase of between 67 Bcf and 73 Bcf.

Inventories now stand at 49 Bcf below year-earlier levels but were 152 Bcf above the five-year average of 2,683 Bcf. The larger-than-expected storage injection initially pressured prices, sending both front-month and continuous contracts lower before they rebounded from an intraday low of $3.196/MMBtu.

The latest storage increase was slightly above the 73 Bcf injection reported the previous week and the five-year average build of 75 Bcf, but well below the 96 Bcf increase recorded during the corresponding week last year. Domestic stockpiles are currently about 5.7% above seasonal norms, according to Trading Economics.

Gelber & Associates, which expected a smaller 73 Bcf increase, said that the miss "is not large enough to reset the broader market narrative by itself, but it does reinforce that the storage cushion remains meaningful even as summer demand begins to build."

Production numbers were around 110 Bcf per day and Trading Economics noted they were essentially unchanged from last month.

Current weather forecasts continued to provide support to the market outlook.

NatGasWeather.com said mild weather across the Midwest and Northeast through Saturday will give way to warmer temperatures beginning Sunday. The forecaster expects natural gas demand to remain moderate through Saturday, then rise to high levels next week.

Meanwhile, LNG gas export demand continued to climb. Trading Economics said average daily feedgas flows to major US export facilities rose to 17.3 Bcf/s in June, up from 17.1 Bcf/d in May, supported by record feedgas deliveries to the Golden Pass facility in Texas.

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