Despite the decline, the contract remained up about 22 percent from an eight-month low of $2.522 in February on the possibility prices could spike later this year if low production and rising exports leave inventories unusually low before next winter.
Inventories, however, were currently 15 percent above normal for this time of year after utilities left more gas than usual in stock during the warm winter. For the week ended April 21, analysts forecast utilities injected an above-normal 67 billion cubic feet into storage. That compared with an increase of 64 bcf during the same week last year and a five-year average build of 57 bcf for that period. US and European weather models projected temperatures would remain warmer-than-normal over the next two weeks, keeping gas usage below 70 billion cubic feet per day (bcfd), near its lowest since October.
Meteorologists forecast temperatures would remain mostly above-normal through the summer - but cooler than the oppressive heat seen last year - sparking expectations excess stockpiles will decline more rapidly than usual as power generators burn more gas to meet higher air-conditioning demand. Analysts forecast utilities will add just 1.7 trillion cubic feet to storage during the April-October injection season, much less than the five-year average of 2.1 tcf, due to stagnant production, higher foreign sales and rising power generator use.
Over the past 30 days, US production averaged just 70.2 bcfd, the lowest for this time of year since 2014. That compared with 72.3 bcfd a year earlier, 73.6 bcfd in 2015 and 67.7 bcfd in 2014 as weak prices over the past two years led to reduced drilling activity, according to Reuters data. US exports were expected to reach 7.7 bcfd this week, up almost 40 percent from a year earlier, according to Reuters data. If that inventory forecast proves correct, storage at the end of October would reach just 3.7 tcf, well below the year-earlier record high of 4.0 tcf and the five-year average of 3.9 tcf.
Copyright Reuters, 2017