On Thursday, US natural gas futures dropped after a forecast for milder weather was combined with unexpectedly big storage build and lower heating demand.
According to the US Energy Information Administration (EIA), in the week ended April 17, storage rose by 43 bcf of gas, bigger than the expected 39 bcf of increase. However, the level was still significantly lower than 92 bcf in the same period of 2019 and the 49 bcf of the five-year average build for the period.
Stockpiles are now 20.5% higher than the five-year average, at 2.140 tcf.
The front-month gas futures for May delivery on the New York Mercantile Exchange dropped by 6.4% or 12.4 cents to settle at USD1.815/mmBtu.
Going forward, analysts predicted gas futures to still be on track to rise for a third consecutive week, up by 13% during that time. Production is estimated to decline as the crash of US crude prices would drive drillers to shut oil wells in shale basins, where those wells also produce a good amount of gas.
Gas futures for calendar 2020 and 2021 were trading higher than the front-month as expectations rose on the possible economic recovery upon the end of activities restrictions. Calendar 2021 has traded over 2022 for 31 consecutive days and over 2025 for 21 days.
The EIA expected that in this year and next year gas production would decline annually for the first time since 2016, and the first time output slump for two years in a row since 2005. This year, EIA projected gas production to average annually at 91.7 bcfd and 87.5 bcfd in 2019.
The expectations have shown up in the daily data as on Wednesday, gas output in the Lower 48 states slumped to the lowest in 11 week at 92.1 bcfd, from Tuesday’s 92.3 bcfd. Demand in the region, including exports have been expected to fall as well. This week it would be 93.1 bcfd but next week it likely be 87.8 bcfd.
