In a surprising turn of events, the natural gas market has experienced a notable resurgence in recent weeks, indicating a potential bull run. Following a significant drop to $2 per metric million British thermal units on April 28, resulting in an 11% decline that week, gas futures have steadily gained momentum.
The subsequent week witnessed a 6% increase, and the current week saw an impressive 15% surge.
During the latest trading session on Thursday, the front-month contract at the hub settled at $2.5920 per metric million British thermal units, marking a substantial daily gain of 22.7 cents or 10%.
More importantly, the benchmark gas contract achieved a two-month high of $2.63, finally surpassing the mid-$2 threshold that had acted as a resistance level since March.
The recent rally in natural gas can be attributed to what some perceive as improving fundamentals in the United States, despite facing a supply glut.
According to the Energy Information Administration (EIA), U.S. natural gas storage experienced a smaller-than-expected increase of 99 billion cubic feet (bcf) last week, boosting market sentiment that has long been yearning for reduced stockpile growth and increased demand.
Comparatively, the previous week had witnessed a build of 78 bcf in gas inventories. Gelber & Associates, an energy market advisory based in Houston, noted, “The market expected a 108-109 bcf injection, and immediately following the release, the prompt price rallied.”
They further explained that a breakthrough above the 50-day moving average would signify a bullish sentiment capable of propelling prices toward the significant resistance level of $3.00 per metric million British thermal units (mmBtu).
However, despite the lower-than-anticipated build in inventories last week, the recent increase brought the total gas stored in underground caverns across the United States to 2.24 trillion cubic feet (tcf).
This figure represents a substantial 30.3% rise compared to the previous year and a noteworthy 17.9% increase above the five-year average of 1.9 tcf.
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