U.S. natural gas surges nearly 5% as future production looks set to slow

U.S. natural gas futures rallied Monday after Baker Hughes reported a sharp drop in the number of active U.S. drilling rigs, suggesting a slowdown in production activity.

Total active gas drilling rigs in the U.S. sank by 16 to stand at 141, the lowest total since April 2022 and the biggest weekly decline since February 2016, Baker Hughes reported Friday.

Front-month Nymex natural gas (NG1:COM) for June delivery closed +4.8% to a two-week high $2.375/MMBtu.

ETFs: (NYSEARCA:UNG), (UGAZF), (BOIL), (KOLD), (UNL), (FCG)

Gas-focused equities sported strong gains, led by EQT Corp (NYSE:EQT), +5%, followed by Southwestern Energy (SWN) +4.2%, Range Resources (RRC) +3.8%, Antero Resources (AR) +3.8%, and Coterra Energy (CTRA) +3%.

U.S. natural gas prices have been mired near two-year lows as warmer weather held down demand while supply remained plentiful.

Meanwhile, European natural gas prices continue to tumble, with benchmark Dutch futures for February plunging as much as 8.5% to ~€32/MWh before paring losses, on tepid demand and higher than normal stockpiles.

J.P. Morgan analysts now forecast benchmark Dutch gas prices to average €27/MWh in Q3, compared with a previous forecast of €70, amid growing confidence that the market will be able to withstand any potential shocks, following last year's price spikes after Russia cut supplies.

U.S. natural gas could consolidate and trade sideways for a time, but long-term fundamentals look bullish, Bluegold Trader writes in an analysis published on Seeking Alpha.