The highly anticipated storage injection of over 100 billion cubic feet for the current natural gas build season has finally materialized, resulting in a significant drop in fuel prices.
On Thursday, the front-month gas contract on the New York Mercantile Exchange’s Henry Hub reached a near one-month low of $2.175 per mmBtu, down 4% for the day. This marked the lowest point for a benchmark Henry Hub contract since April 5 when it hit $2.031.
According to analysts from Houston-based energy markets advisory Gelber & Associates, natural gas futures have experienced five consecutive sessions of losses. They attribute this decline to increased production levels, a relatively cool two-week weather outlook, and ongoing maintenance of LNG plants. These factors have provided fundamental support for the recent price drops.
However, Gelber’s analysts suggest that gas prices may see a modest increase in the near future. They anticipate a rise in cooling demand starting in mid-June, which could offer some bullish support as the market approaches that point. The analysts also highlight the importance of monitoring bearish momentum and whether key support levels will be breached.
The Energy Information Administration (EIA) reported that U.S. natural gas inventories rose by 110 billion cubic feet (bcf) during the week ending on May 26. This marks an increase compared to the 96-bcf injection observed in the previous week (ending May 19). It also surpasses the 82-bcf injection recorded during the same week last year and the five-year average build of 101 bcf (2018-2022).
According to the EIA, total gas stored in underground caverns in the United States now stands at 2.446 trillion cubic feet (tcf), representing a 29.5% increase from the previous year’s level of 1.889 tcf and a 16.6% rise compared to the five-year average of 2.097 tcf.
Just two weeks ago, the Henry Hub benchmark gas contract reached 11-week highs, hovering around $2.70. This breakthrough from the mid-$2 range suggested that the market might finally be transitioning from an oversupplied state based on its underlying fundamentals.
However, in recent days, prices fell below $2.50, reinforcing the formidable barrier gas bulls face due to high production, subdued LNG demand, and weak cooling demand caused by unusually mild pre-summer weather.
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