U.S. natgas pops nearly 10% to highest since mid-March on low storage build
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U.S. natural gas futures soared to their best level in two months Thursday, as a smaller than expected build in domestic stocks sparked concerns over tighter supplies that caused traders to exit bearish bets.
U.S. natgas, which had been mired near two-year lows, has rallied this week after Baker Hughes reported a sharp drop in the number of active U.S. drilling rigs.
Front-month Nymex natural gas (NG1:COM) for June delivery closed +9.6% to $2.592/MMBtu, the highest settlement value since March 13 and best one-day percentage gain since November 2.
Gas-focused equities went along for the ride, including Antero Resources (NYSE:AR) +8.5%, Comstock Resources (CRK) +8.5%, Range Resources (RRC) +7.1%, Southwestern Energy (SWN) +6.9%, EQT Corp. (EQT) +5.8%, Chesapeake Energy (CHK) +5%, Coterra Energy (CTRA) +3.2%.
ETFs: (NYSEARCA:UNG), (UGAZF), (BOIL), (KOLD), (UNL), (FCG)
Natural gas rocketed higher after the U.S. Energy Information Administration reported a smaller than expected rise in domestic supply, saying utilities added just 99B cf of gas to storage during the week ended May 12, compared with a consensus estimate for a 106B cf increase.
Also, gas flowing from Canada to the U.S. fell to a fresh 25-month low 6.4B cf/day on Wednesday, as wildfires in Alberta have caused some producers to shut output and pipeline flows in the past two weeks.
Some 8% of gas consumed in the U.S. or exported as liquefied natural gas or via pipelines comes from Canada.
Meanwhile, European natural gas futures continue to decline, slumping below €30/MWh for the first time since June 2021, as the continent recovers from its energy crisis.
But the global market remains tight, and prices could overreact in the event of sudden changes in supply or currently "depressed" demand, Chris O'Shea, CEO of top U.K. energy supplier Centrica (OTCPK:CPYYF) (OTCPK:CPYYY) reportedly said on a call with analysts Thursday.
Natural gas prices look set to revive and possibly could double during the next 16 months, but natural gas ETFs "could disappoint," John Overstreet writes in an analysis published on Seeking Alpha.