With the latest forecasts contributing only small adjustments to the outlook and the market continuing to mull balances following a hefty weekly inventory build, natural gas futures were trading slightly higher early Friday. The Nymex July contract was trading around $2.567/MMBtu as of 8:30 a.m. ET, up 2.0 cents.

The Energy Information Administration (EIA) on Thursday reported a much larger-than-expected 114 Bcf injection into U.S. natural gas stocks for the week ended May 24, versus a 95 Bcf build recorded in the year-ago period and the five-year average 97 Bcf injection. Total Lower 48 working gas in underground storage stood at 1,867 Bcf as of May 24, 156 Bcf (9.1%) higher than year-ago levels but 257 Bcf (minus 12.1%) below the five-year average, according to EIA.

This week's 114 Bcf of U.S. natural gas build came in a “whopping” 16% ahead of Tudor, Pickering, Holt & Co. (TPH) forecasts, analysts said, "helping reduce the deficit to the five-year average to only 12%, compared to 14% a week ago.

"The larger than forecast build could reflect somewhat of a catch-up print, as the prior two weeks came in a combined 15 Bcf below expectations.”

Injections are coming in "faster than in years' past, with this week's build 20% higher than the five-year average and 19% ahead of last year; on a weather adjusted basis the market continues to be 3 Bcf/d oversupplied,” the TPH team said.

"Focusing on regional storage, inventories in the East region now sit only 3% below the five-year average, while in the Mountain region, inventories remain outside of the five-year range (31% below the five-year average).”

TPH noted that U.S. liquefied natural gas (LNG) feed gas demand remained strong this week, with volumes averaging 5.8 Bcf/d "amid growing concerns around weakening LNG demand out of Europe.” TPH’s preliminary modeling for next week’s storage report is showing a 107 Bcf build, "in line with the five-year average for the week, which typically represents trough demand for the year."

This week’s injection implies the market was 5.3 Bcf/d looser than last year adjusting for weather, and the market has averaged 2.7 Bcf/d looser over the past four weeks, according to analysts with Raymond James & Associates.

Analysts with Jefferies LLC observed that injections have continued to run above average but were only around 18% above average in May compared to around 141% larger than average in April.

In terms of balances, “May production has averaged around 87.1 Bcf/d, just ahead of April’s record production of 86.9 Bcf/d,” according to the Jefferies team. “Production is up 7.0 Bcf/d year/year, the lowest year/year growth since November 2017. Haynesville production has continued its climb, averaging a new high of 11.4 Bcf/d thus far in May.

“Waha pricing is clearly still weighing on Permian production, which is down around 170 MMcf/d sequentially and at the lowest level since September 2018. Appalachia production, at 31.2 Bcf/d, is down slightly versus April at 31.3 Bcf/d.”

On the demand side, LNG feed gas flows have averaged 5.6 Bcf/d in May, up 2.6 Bcf/d year/year and topping the previous monthly record of 4.9 Bcf/d set in March, the Jefferies analysts said.

“Sabine Pass Trains 1-5, Corpus Christi and Cove Point all ran near capacity during the month,” analysts said. “Cameron flows ramped up to around 320 MMcf/d in May (about 500 MMcf/d over the last week), and initial flows started at Elba Island and Freeport.”

Meanwhile, Bespoke Weather Services noted only minor changes to its forecast based on the overnight weather models.

Guidance is “stuck for now in a rather non-eventful pattern where deviations from normal are small on any given day now that the eastern heat has begun to fade away,” Bespoke said. Both American and European guidance was “just a touch warmer overnight, but these themes remain.”

Daily balances have shown “steady improvement,” with the past few days showing the tightest weather-adjusted power burns since early April, according to the firm.

“Production is starting off a little lower today as well, still failing to get up to its highs as we close out the month of May,” Bespoke said. “All in all, the data suggests that the $2.54-2.55 floor should hold in the July contract, but cash prices could again be very weak today, which could at least briefly pull prices under that level.”

July crude oil futures were trading around $55.36/bbl as of 8:30 a.m. ET, down $1.29, while July RBOB gasoline was trading around $1.8172/gal, off around 3.7 cents.