U.S. natural gas futures fell more than 4% on Friday, driven by a federal report showing a bigger-than-expected storage build last week.

Front-month gas futures for December delivery on the New York Mercantile Exchange moved 19.4 cents lower, or 4.2%, to $4.45 per million British thermal units (mmBtu) at 10:53 a.m. EST (1553 GMT). The contract hit its highest level since March 10 in the previous session.

The U.S. Energy Information Administration (EIA) said energy firms injected 45 billion cubic feet (bcf) of gas into storage during the week ended November 7.

The build surpassed analyst expectations for a 34 bcf increase in a Reuters poll and compares with a boost of 45 bcf during the same week a year ago and a five-year average build of 35 bcf for this time of year.

“Definitely a shock based off the expectations, a much bigger than expected increase in supplies that caught the market,” said Phil Flynn, senior analyst for Price Futures Group, adding that the market was already down because of warm weather expectations.

Financial company LSEG expects average gas demand across the Lower 48 U.S. states, including exports, to rise to 117.3 bcfd this week from 108.6 bcfd the previous week.

LSEG estimated 257 heating degree days (HDDs) over the next two weeks, slightly higher than the 253 estimated on Thursday. HDDs, which measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius), are used to estimate demand to heat homes and businesses.

The average amount of gas flowing to the eight big U.S. LNG export plants has risen to 17.8 bcfd in November, up from a record 16.7 bcfd in October.

“Overall the market will remain supported by strong export demands from LNG,” said Gary Cunningham, director of market research at Tradition Energy.

“December should be able to easily hold above $4 through expiration, with a $4.25-$4.60 range most likely.”

LSEG said average gas output in the Lower 48 states has risen to 109.2 billion cubic feet per day (bcfd) so far in November, up from 107.0 bcfd in October and a record monthly high of 108.0 bcfd in August.

Elsewhere, Dutch and British gas prices on Friday morning rose off an 18-month low hit a day earlier, as temperatures are forecast to fall sharply next week, increasing energy demand that should also see a step-up in gas storage withdrawals.
Source: Reuters