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U.S. natural gas futures fell almost 4% on September 19 as a bigger-than-expected storage build and forecasts for less cooling demand next week knocked prices further off their highest in nearly five months.
The U.S. Energy Information Administration (EIA) said utilities added 84 billion cubic feet (bcf) of gas to storage during the week ended September 13.
That was higher than the 78-bcf build analysts forecast in a Reuters poll and compared with an injection of 84 bcf during the same week last year and a five-year (2014-18) average build of 82 bcf for the period.
Last week's increase boosted stockpiles to 3.103 trillion cubic feet (tcf), 2.4% below the five-year average of 3.178 tcf for this time of year.
The amount of gas in inventory has remained below the five-year average since September 2017. It fell as much as 33% below that average in March 2019. But with production near a record high, analysts said, stockpiles should reach a near-normal 3.7 tcf by the end of the summer injection season on October 31.
Front-month gas futures for October delivery on the New York Mercantile Exchange fell 9.9 cents, or 3.8%, to settle at $2.538 per million British thermal units (mmBtu), the biggest daily percentage drop since mid July.
Earlier this week, the contract traded near September 16's close of $2.681, its highest since April 10. The front-month exited technically overbought territory for the first time in 13 days, but remained up about 25% over a three-year low of $2.029 per mmBtu hit on Aug. 5. During the past two weeks, prices rose as warmer weather fed air conditioning demand and power generators burned more gas than usual.
Traders noted that warmer than normal weather in late September is a lot cooler than in the summer. If warm weather persists, it will reduce the need for heat, which could hit gas demand. As the weather cools with autumn, data provider Refinitiv projected average gas demand in the lower 48 U.S. states will drop from 85.3 billion cubic feet per day (bcfd) to 81.9 bcfd next week.
In Texas, the remnants of Tropical Storm Imelda caused flooding in the Houston area. Exxon Mobil Corp shut the Beaumont oil refinery, but so far power outages were minimal.
U.S. gas exports are expected to rise over the next two weeks, but not as fast as power generators cut the amount of fuel they burn.
Gas flows to U.S. liquefied natural gas (LNG) export plants held at 6.5 bcfd on September 18, up from an average of 6.1 bcfd last week, according to Refinitiv data.
Refinitiv projected flows to LNG terminals could rise to a record high 6.8 bcfd next week.
Exports to Mexico held around 5.1 bcfd this week even though flows through the 2.6-bcfd Valley Crossing and Sur de Texas-Tuxpan pipes started after TC Energy Corp and Sempra's IENOVA unit resolved pipeline contract disputes with Mexico's Federal Electricity Commision in late August.
Traders said they expect pipeline exports to Mexico to rise over the next few weeks, especially after Kinder Morgan Inc's Gulf Coast Express pipe from the Permian basin to the Texas Gulf Coast enters service in late September/early October.
Gas production in the lower 48 states edged up to 91.5 bcfd on September 18 from 91.3 bcfd on September 17, according to Refinitiv data. That compares with an all-time daily high of 93.0 bcfd on August 19.
(Writing by Jessie Jia Editing by Harry Huo)
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