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NYMEX August gas settles 3.2 cents lower despite wider storage deficit

Houston — The NYMEX August natural gas futures contract settled at $2.797/MMBtu Thursday, down 3.2 cents, after the US Energy Information Administration estimated a 51-Bcf build to gas inventories, widening the deficit to year-ago levels.

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The front-month contract traded between $2.789/MMBtu and $2.827/MMBtu on Thursday.

EIA's announcement earlier Thursday bumped stocks up to 2.203 Tcf for the week that ended July 6, but total stocks are 725 Bcf below year-ago levels and 519 Bcf below the five-year average.

The storage deficit persists, but the market is hesitant to respond as it has factored in record production seen in the last couple of weeks.

"There isn't an overwhelming fear that demand will not be met in the winter months," said David Thompson, executive vice president at Powerhouse Brokerage.

US dry gas production was expected to be 79.6 Bcf Thursday, and is expected to stay at about the same level over the next eight to 14 days, according to S&P Global Platts Analytics.

Total US supply so far this month has averaged 86.4 Bcf/d, up 8.4 Bcf/d compared with the year-ago period, according to Platts Analytics.

Total US demand -- excluding exports to Mexico and LNG exports -- fell 1.2 Bcf day on day Thursday, with power burn, which slipped 1 Bcf day on day, accounting for most of the change, according to Platts Analytics.

The most recent eight- to 14-day outlook from the National Weather Service calls for slightly higher-than-average temperatures for much of the US, although they will not reach the levels posted in recent weeks.

Midcontinent and Northeast demand both dropped 0.4 Bcf day on day Thursday.

Power burn fell 351 MMcf day on day in the Northeast Thursday, but is still averaging 8.485 Bcf/d thus far in July, 11% above its year-ago level, according to Platts Analytics.

The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).

--Arsalan Syed, arsalan.syed@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com