Houston — The NYMEX September natural gas futures settled 5.8 cents higher Thursday at $2.816/MMBtu after the US Energy Information Administration announced a lower-than-expected storage build for the week that ended July 27.
The front-month contract traded Thursday between $2.740/MMBtu and $2.828/MMBtu.
The EIA announced a storage build of 35 Bcf for the week that ended July 27, lifting US inventories to 2.308 Tcf. Total stocks are 688 Bcf below inventories one year ago and 565 Bcf below the five-year historical average. This announcement made last week the fourth consecutive week of lower-than-expected builds.
The initial price reaction to the storage number was an increase of about 5 cents, as supply concerns intensified. An S&P Global Platts survey of analysts called for a 45-Bcf injection.
Looking ahead to the NYMEX winter strip, the January and February contracts have broken above the $3/MMBtu mark.
Inventories are so far below the usual level, but the front month is trading below the $3/MMBtu the market would expect to see, sources said.
"This shows how the market isn't quite concerned about stocks, mainly because the market believes that US producers can knock production out of the park," said Phil Flynn, Price Futures Group senior market analyst.
A recent decrease in power burn demand and continued strong dry gas production could narrow the storage deficit, sources said, but forecasts projecting a warmer-than-average August may delay any catch-up.
US dry gas production is expected to fall 700 MMcf day on day to 79.1 Bcf on Thursday, which would be its second consecutive day below 80 Bcf, according to S&P Global Platts Analytics.
The Marcellus Shale play was responsible for most of the fall, decreasing 210 MMcf to 21.09 Bcf, according to Platts Analytics.
Looking ahead, the most recent six- to 10-day temperature forecast from the National Weather Service calls for warmer-than-average temperatures for much of the US, but temperatures have backed off in the Pacific Northwest and the Southwest, in contrast to the intense heat the regions faced in late July.
The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
