Natural Gas Soars on Smaller-Than-Expected Supply Build, Chilly Weather

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Natural gas futures are staging a huge late-week rally after the US government reported a smaller-than-expected supply build. Natural gas prices have been posting modest gains this week on annual springtime maintenance and conservative energy demand overseas. With chilly weather in many parts of the US, natural gas could enjoy a mini boost. That is if bulls do not take early profits.

May natural gas futures surged $0.043, or 1.6%, to $2.735 per million British thermal units (btu) at 14:42 GMT on Thursday on the New York Mercantile Exchange. Natural gas is poised for a weekly boost of nearly 3%, adding to its year-to-date rally to about 8%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas increased 38 billion cubic feet in the week ending April 16. This is below the median estimate of 49 billion cubic feet.

In total, US supplies stand at 1,883 trillion cubic feet, down 251 billion cubic feet from the same time a year ago. They are also 12 billion cubic feet above the five-year average of 1.871 trillion cubic feet.

In recent sessions, the bulls have been making a move on chilly weather to close out the month of April. Cool weather trends are forecast to travel across the northern US this weekend and early next week. But weather models showing temperatures normalizing to kick off May.

On the technical front, natural gas prices found short-term support on typical springtime pipeline maintenance and modest liquefied natural gas (LNG) demand. The lower output and an increase in consumption had influenced pricing behavior, which had been anticipated due to growing European demand.

Baker Hughes released its latest global LNG demand projections to 2030, predicting that LNG consumption will intensify in the coming years.

CEO Lorenzo Simonelli said during a first-quarter conference call:

As we look ahead to the rest of 2021, we remain cautiously optimistic that the global economy and oil demand will recover from the impact of the global pandemic.

Accordingly, we see potential upside to our 2030 LNG demand view. Based on recent third-party analysis and directionally supported by discussions with some of our customers, we now see the potential 600-650 mmty of global LNG demand by 2030.

With more nations phasing out crude oil in favor of natural gas, the so-called bridge fuel could see enormous gains over the next several years.

Market analysts believe that bulls took some profits ahead of the US government’s storage report. As a result, industry observers are forecasting that prices could experience a pullback to $2.65 in the near term. Looking ahead to the June contract, experts say that bulls need to see prices target as high as $3.082 to avoid a correction.

In other energy commodities, May West Texas Intermediate (WTI) crude oil futures tumbled $0.23, or 0.37%, to $61.14 per barrel. June Brent crude futures slumped $0.19, or 0.29%, to $65.13 a barrel. May gasoline futures slid $0.0095, or 0.48%, to $1.9739 per gallon. May heating oil futures dipped $0.004, or 0.22%, to $1.8513 a gallon.

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