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US Natural Gas Update: Smallish Inventory Build Pushes Futures Price Up

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US natural gas futures retreated from earlier highs in after-hours trading on Thursday but remained positive after government data showed a smaller-than-expected increase in storage inventories, reinforcing expectations that summer demand could tighten market balances.

The front-month Henry Hub futures contract and the continuous contract both rose by 2.23% to $3.215 per million British thermal units.

The US Energy Information Administration reported a 73 billion cubic feet injection into storage for the week ended June 12, below the upper end of analyst expectations, which ranged from 66 Bcf to 117 Bcf. Total inventories rose to 2.759 trillion cubic feet.

The build matched the five-year average for the period but was below the 97 Bcf injection recorded during the same week last year. Stockpiles now stand about 1% below year-ago levels and 151 Bcf, or 5.8%, above the five-year average.

"Today's fundamental balances still need to show that summer demand can consistently outrun available supply," Gelber & Associates said in a note. The firm said inventories are 151 Bcf above the five-year average, which helps explain the relatively measured market response despite the supportive headline figure. The latest injection also marked a slowdown from the previous week's 108 Bcf build.

On the supply side, US dry gas production was estimated at 111.4 Bcf per day on Thursday, up 1.3 Bcf/d from the prior day and 4.4% above year-earlier levels, Barchart said, citing BNEF data.

Gelber & Associates said production is expected to remain within a 110.0-110.6 Bcf/d range. The firm also noted that Canadian imports averaged 5.5 Bcf/d.

Trading Economics estimated average US gas production at 109.4 Bcf/d so far in June, slightly below May's average of 109.7 Bcf/d.

Barchart, citing weather forecaster Vaisala, reported that most of the Lower 48 states are expected to experience above-normal temperatures between June 28 and July 2, suggesting increased power demand ahead.

On Thursday, BNEF said gas demand was estimated at 71.9 Bcf/d, up 2.5 Bcf/d from Wednesday but down 3.1% from a year earlier. Celsius Energy estimated total power-sector gas consumption at 34.7 Bcf/d for Wednesday, up 0.3 Bcf/d from the previous day but roughly 4 Bcf/d below year-ago levels.

Meanwhile, estimated net flows to US LNG export terminals were pegged at 19.2 Bcf/d on Thursday by BNEF, up 2.8% from a week earlier but down 0.3 Bcf/d from the previous day.

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