US natural gas prices hit over 2-week high on smaller storage build, strong LNG exports

By Sherin Elizabeth Varghese

Aug 28 (Reuters) - U.S. natural gas futures climbed to a more than two-week high on Thursday after a U.S. report showed a smaller-than-expected storage build and on strong liquefied natural gas exports.

Front-month gas futures for October delivery NGc1 on the New York Mercantile Exchange rose 5.8 cents, or 2%, to settle at $2.94 per million British thermal units. Prices extended gains for a third straight session to their highest since August 11.

The U.S. Energy Information Administration said energy firms added 18 billion cubic feet of gas into storage during the week ended August 22.

That was smaller than the 26-bcf build analysts forecast in a Reuters poll and compares with an increase of 35 bcf during the same week a year ago and a five-year (2020-2024) average build of 38 bcf for this time of year. EIA/GAS NGAS/POLL

"It has to do with the storage report number we just observed - it was a little tighter than estimates, which has sparked some short-covering. Despite weaker demand from declining cooling degree days, storage injections have been smaller than expected since last week, suggesting production is being overestimated," said Robert DiDona, president of Energy Ventures Analysis.

Financial firm LSEG estimated 128 cooling degree days over the next two weeks, lower than the 155 CDDs estimated on Wednesday. The norm for this time of year is 130 CDDs. CDDs, which are used to estimate demand to cool homes and businesses, measure the number of degrees a day's average temperature is above 65 degrees Fahrenheit (18 degrees Celsius).

LSEG projected average gas demand in the Lower 48 states, including exports, would ease from 111.1 billion cubic feet per day this week to 107.3 bcfd next week and 104.2 bcfd in two weeks. The forecasts for this week and next were similar to LSEG's outlook on Wednesday.

"Between summer cooling and winter heating, the fall shoulder season brings maintenance across pipelines, production, power plants, and LNG facilities, which could drive volatility. The key factor will be whether storage injections increase significantly or hold below expectations, keeping inventories under 3.9 tcf (trillion cubic feet) by the end of October," DiDona said.

LSEG said average gas output in the Lower 48 states had risen to 108.5 bcfd in August, up from a record monthly high of 107.8 bcfd in July.

The average amount of gas flowing to the eight big U.S. LNG export plants has risen to 15.9 bcfd in August, up from 15.6 bcfd in July. That compares with a record monthly high of 16.0 bcfd in April.

In the tropics, the U.S. National Hurricane Center reported no disturbances in the Atlantic, while Tropical Storm Fernand, which formed south-southeast of Bermuda on Saturday, transitioned into a post-tropical system on Thursday.

According to the average estimate of analysts in a Reuters poll, U.S. energy firms likely added a below-normal 26 billion cubic feet of natural gas into storage last week. That compares with an increase of 35 bcf during the same week a year ago and a five-year (2020-2024) average build of 38 bcf for this time of year. In the prior week ended August 15, utilities added 13 bcf of gas into storage. EIA/GAS NGAS/POLL

Meanwhile, EQT Corp EQT.N is in talks to secure LNG supplies from NextDecade's NEXT.O export terminal under construction in Texas, Bloomberg News reported on Wednesday, citing sources.

Commercial activity in the U.S. LNG sector has picked up rapidly since President Donald Trump lifted a moratorium on new export permits shortly after taking office in January.