Front-month gas futures for September delivery fell 4.8 cents, or 2.2%, to settle at $2.17 per million British thermal units, marking their biggest daily percentage fall since August 5.
"Consensus of short term weather forecasts are leaning in favor of mild temperatures with extension now into early September," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. Refinitiv data indicated 178 cooling degree days (CDDs) in the Lower 48 states over the next two weeks, lower than 190 forecast on Tuesday. The normal is 168 CDDs for this time of year.
CDDs measure the number of degrees a day's average temperature is above 65 degrees Fahrenheit (18 degrees Celsius) and are used to estimate demand to cool homes and businesses. "Additionally, we are expecting a larger-than-normal storage injection in Thursday's weekly EIA release that could force a reduction in the deficit to below 100 bcf. As a consequence, this looks like a market that could head back south during the coming sessions," Ritterbusch added.
Analysts forecast an above-normal injection of about 60 billion cubic feet (bcf) of gas into storage during the week ended August 16. That compares with a five-year (2014-18) average build of 51 bcf for the period. The US Energy Information Administration will release its weekly storage report at 10:30 am EDT (1430 GMT) on Thursday.
Gas production in the Lower 48 US states slipped to 91.2 bcfd on Tuesday from an all-time high of 92.5 bcfd scaled on Monday, Refinitiv data showed. Analysts said gas futures had traded near multi-year lows since May because record output and mild spring weather allowed utilities to inject huge amounts of gas into storage.
The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33% below that average in March 2019. But with production expected to keep growing, analysts said, stockpiles should reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season on October 31. Refinitiv data projected demand in the Lower 48 would fall to 89.0 bcfd next week from 91.6 bcfd this week. This compares with the 90.3 bcfd forecast the prior week.