Houston — The NYMEX September natural gas futures price jumped Thursday after a lower-than-expected storage build was announced by the US Energy Information Administration for the fourth consecutive week.
As of 11:33 am EDT (1533 GMT), the NYMEX front-month contract was trading 6.7 cents higher at $2.825/MMBtu. September has traded in a range between $2.740/MMBtu and $2.826/MMBtu so far on Thursday.
The EIA announced a storage build of 35 Bcf in the week that ended July 27, lifting US inventories to 2.308 Tcf. Total stocks are 688 Bcf now below inventories one year ago and 565 Bcf under the five-year historical average.
The initial reaction to the storage number was an increase of about 5 cents, as supply concerns intensify on a fourth consecutive stock build that failed to meet expectations. 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 some way below the $3/MMBtu the market would expect to see, sources say. "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," according to Phil Flynn, Price Futures Group senior market analyst.
A recent decrease in power burn demand and continued strong dry gas production are seen as one way the storage deficit could narrow, sources say, 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, 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 us, but temperatures have backed off in Pacific Northwest and Southwest compared with the intense heat the regions faced in late July.
