That increase came despite a federal report showing a bigger-than-expected weekly storage build and a decline from previous estimates in expected power generator demand next week.
The US Energy Information Administration (EIA) said utilities added 89 billion cubic feet (bcf) of gas to inventories during the week ended June 28. The government released the storage report a day earlier than usual due to the US July Fourth holiday on Thursday.
That was a little more than the 85-bcf build analysts estimated in a Reuters poll and compares with an increase of 76 bcf during the same week last year and a five-year (2014-18) average increase of 70 bcf for the period.
It was the 16th week in a row that storage increases were bigger or decreases were smaller than the five-year average, the most since November 2014 when utilities added more gas or removed less gas than usual for a record 30 consecutive weeks, according to federal energy data going back to 2010.
The addition for the week of June 28 boosted stockpiles to 2.390 trillion cubic feet (tcf), 6.0% below the five-year average of 2.542 tcf for this time of year.
Front-month gas futures for August delivery on the New York Mercantile Exchange rose 5.0 cents, or 2.2%, to settle at $2.290 per million British thermal units (mmBtu).
Despite the increase on Wednesday, traders have noted the front-month has held near multi-year lows since the end of May as near-record production and moderate weather allowed utilities to inject huge amounts of gas into stockpiles, shrinking a massive storage deficit and removing any concerns about shortages next winter. On June 20, the contract fell to $2.185 per mmBtu, its lowest settlement since May 27, 2016.
The amount of gas in storage has remained below the five-year average since September 2017. It peaked at 33% under the five-year average in March 2019. Analysts, however, forecast inventories will reach a near-normal 3.7 tcf by the end of the summer injection season on Oct 31.
Output in the Lower 48 US states eased to 90.1 billion cubic feet per day (bcfd) on Tuesday from a 13-week high of 90.3 bcfd on Monday, according to data provider Refinitiv. That compares with an all-time daily high of 90.5 bcfd on March 29 and an average of 82.8 bcfd during this week last year.
On the demand side, Refinitiv on Wednesday reduced the amount of gas it expects power plants to burn next week and how much liquefied natural gas (LNG) will flow to export terminals from previous estimates.
Demand, however, is still expected to rise next week compared with this week because the weather is warming across the nation for the summer, boosting the amount of gas the power sector needs to burn to keep air conditioners humming.
Refinitiv projected demand in the Lower 48 states would rise from 87.4 bcfd this week to 90.0 bcfd next week. That compares with its forecasts on Tuesday of 87.1 bcfd for this week and 90.4 bcfd for next week.
As for LNG exports, Refinitiv still expects the United States will export a record 6.3 bcfd of gas over the next two weeks, but that is not as much as the 6.5 bcfd it forecast on Tuesday.
Those additional LNG exports will come from new units at several LNG export terminals, including Cheniere Energy Inc's Corpus Christi, Sempra Energy's Cameron in Louisiana, Freeport LNG's Freeport in Texas and Kinder Morgan Inc's Elba in Georgia.
Analysts said those new units will add to the current global LNG glut.
Traders said they would not be surprised to see LNG buyers reject some US cargoes after gas prices in Europe and Asia fell to multi-year lows over the past few weeks. Global gas prices, however, recovered this week as a heat wave blanketed much of Europe, boosting power demand needed to meet higher air conditioning use.