Natural gas futures fall 2.9% as storage build trims surplus

The smallest storage build of the season trimmed the U.S. natural gas surplus over the five-year average to 185 Bcf, yet Nymex futures still settled down 2.9 percent at $2.733 per million British thermal units Thursday.

"The small build confirms that current heat and power-sector demand are limiting injections, but stocks remain comfortably above the five-year average and are still projected to approach 4 trillion cubic feet by the end of the injection season," Gelber & Associates said in a note.

Gas in underground storage rose 16 Bcf last week to 3,169 Bcf, the Energy Information Administration reported, below the five-year average build of 29 Bcf and the 18 Bcf consensus in a Wall Street Journal survey. Inventories sit 28 Bcf below the year-earlier level. The South Central region withdrew 13 Bcf, with salt stocks falling 18 Bcf.

The injection season runs through October, and stocks are projected to approach 4 Tcf by its end. Eli Rubin of EBW Analytics said that while South Central heat supports prices, a sharp retreat in cooling degree days into the end of summer nationally may yield near-term softening.

Storage surplus narrows as heat drives power demand

The 16 Bcf build reduced the surplus from 198 Bcf the week before, the third consecutive weekly narrowing. Power-sector demand has kept injections below seasonal norms through the hottest stretch of summer, with cooling load in the South Central region drawing down salt cavern stocks by 18 Bcf. The print landed below the 13 Bcf to 19 Bcf consensus range that EBW Analytics flagged ahead of the release, after last week's bearish storage surprise. The drawdown in salt stocks, which respond fastest to power demand, shows how tightly summer cooling load is binding the market even as total inventories remain ample. The surplus over the five-year average narrowed by 13 Bcf in a single week, the steepest weekly contraction of the injection season, as persistent heat across the South and Southeast kept gas-fired generation running at elevated rates.

Forward curve points to a 4 Tcf finish

Gelber projects inventories approaching 4 Tcf by the end of the injection season, a level that would leave ample cushion heading into winter withdrawal months. The bearish gas print contrasts with a firmer broader energy complex, where WTI crude tested new highs above $86 a barrel and Brent crude traded near $94 after President Donald Trump threatened economic isolation for Iran's trading partners. The divergence reflects distinct drivers: gas is weighed down by a still-large storage cushion, while crude is supported by geopolitical risk to supply. If cooling demand fades as expected into September, futures could retest the $2.70 level and August lows near $2.62, while a sustained heat wave would push prices toward the $2.80 resistance and the 50-day moving average at $2.97. The next EIA storage report, due Aug. 27, will show whether the surplus keeps narrowing as the shoulder season approaches and whether the market can hold above the $2.70 support into the autumn.

This article is for informational purposes only and does not constitute investment advice.