TMN - Natural gas

Natural gas prices slip on upbeat storage build

On Friday, natural gas prices declined after the better-than-expected report by the Energy Information Administration (EIA).

US futures tied to the commodity slumped 1.34% or 0.11 points to $8.37 per million British thermal units (MMBtu). Nevertheless, the contracts still hovered above a one-week high.

The latest government inventory data revealed an upturn to the average gas output in the US Lower 48 states. In May, the reading grew to 95.10 billion cubic feet per day from the previous 94.50. That compares with a monthly record of 96.10 bcfd in December 2021.

Moreover, natural gas storage delivered a 90.00 bcf injection for the week ending May 27. It notably surpassed the anticipated 86.00 bcf build.

Nevertheless, traders see the reading as smaller than usual as power generators burned more gas last week to produce electricity amid high coal prices.

Still, the better-than-forecasted natural gas report offset the record power demand in Texas. The power use in the US state reached the highest level on record for the month of May.

In addition, experts anticipated the consumption to likely break the grid’s all-time high early next week. The recent economic growth boosts overall usage, and hot weather is causing homes and businesses to utilize their air conditioners.

Natural gas to rebound on demand prospects

Meanwhile, analysts projected the natural gas futures to eventually recover in the near term amid the higher demand prospects. They forecasted NGAS to climb by 15.00% or more by year-end as supplies still fall far short of demand.

Subsequently, equipment and personnel shortages, combined with underinvestment in the sector, will probably lead to a rally to $10.00.

Natural gas contracts currently trade about 134.00% higher so far this year. The higher prices in Europe and Asia keep demand for US LNG exports strong, especially amid the Russia-Ukraine crisis. Furthermore, the United States remain the world’s top NGAS producer.

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