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US natural gas futures inched higher on Wednesday as declining production provided some support, but prices held near a one month low on forecasts for the weather to moderate over the next two weeks, keeping cooling and heating demand low.

Gas futures for November delivery on the New York Mercantile Exchange rose 1.4 cents, or 0.6%, to $2.297 per million British thermal units (mmBtu) by 09:54 am EDT (1354 GMT) after touching their lowest since August 30, at $2.266 earlier in the session.

Gas output in the Lower 48 states fell to 92.5 billion cubic feet per day (bcfd) on Tuesday from 93.7 bcfd on Monday, according to Refinitiv data, but was near the all-time daily high of 93.8 bcfd posted on September 29.

"Market is just consolidating. The weather forecast does not have any noticeable change, but the pipeline data is less bearish compared to yesterday, which is providing a little bit of support," said Kyle Cooper, consultant at ION Energy in Houston.

However, the weather is still bearish and production levels should tick back up, so expect prices to trade lower in the near-term, he added.

Analysts said utilities likely added 104 bcf of gas to storage during the week ended September 27. That compares with an injection of 91 bcf during the same week last year and a five-year (2014-18) average build of 83 bcf for the period.

"We feel that an injection of at least 100 bcf (in tomorrow's storage report) will be required to push this market much lower as it is now evolving into an oversold technical condition," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

"But we will also note that the money managers still possess much ammo to employ toward the short side and this week's additional chart damage is likely emboldening them into establishing a larger bearish exposure."

The amount of gas in inventory has remained below the five-year average since September 2017. It fell as much as 33% below that in March 2019. But with production hitting record highs, analysts said stockpiles should reach a near-normal 3.7 tcf by the end of summer injection season on October 31.

Data provider Refinitiv projected gas demand in the lower 48 US states would fall to an average of 82.4 bcfd next week from an average around 85.5 bcfd forecast this week.

Those demand forecasts include exports, which analysts said would likely rise as more gas flows to LNG export plants and pipelines to Mexico.

Copyright Reuters, 2019


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