U.S. Gas Futures Fall to 6-Week Low on Big Storage Build
U.S. natural gas futures tumbled almost 10% to a six-week low on Thursday as a bigger-than-expected storage build last week kept stockpiles on track to reach record highs by the end of October.
The U.S. Energy Information Administration (EIA) said utilities injected 89 billion cubic feet (bcf) of gas into storage in the week ended Sept. 11.
That is higher than the 79-bcf build analysts forecast in a Reuters poll and compares with an increase of 82 bcf during the same week last year and a five-year (2015-19) average build of 77 bcf.
Even before the EIA released its report, prices were already under pressure with output expected to rise from a two-year low as producers return wells shut-in for Hurricane Sally and on forecasts calling for milder weather and lower cooling demand over the next two weeks.
Front-month gas futures fell 22.5 cents, or 9.9%, to settle at $2.042 per million British thermal units, their lowest since July 31. That was the contract's biggest one-day percentage loss since January 2019.
"The magnitude of today’s decline strongly suggested some margin call selling as remaining recently acquired speculative longs were forced to liquidate," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
In recent weeks, speculators had boosted their net long positions to the highest in almost three years despite expectations record stockpiles would make price spikes and gas shortages unlikely this winter.
Data provider Refinitiv said output in the Lower 48 U.S. states was on track to rise to 85.3 billion cubic feet per day (bcfd) on Thursday from a two-year low of 84.8 bcfd on Wednesday due to Sally-related shutdowns.
With cooler weather coming, Refinitiv projected demand, including exports, would fall from 85.3 bcfd this week to 81.9 bcfd next week.