Natural gas futures soared on Thursday after the US government reported a much larger-than-expected supply withdrawal. The energy commodity has been on a tear, buoyed by a mix of cooler temperatures and strengthening demand. Is $7 feasible for natural gas prices?
May natural gas futures surged $0.395, or 6.55%, to $6.424 per million British thermal units (Btu) at 19:54 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices have climbed more than 16% over the last week, adding to their year-to-date gain of nearly 80%.
According to the US Energy Information Administration (EIA), domestic inventories of natural gas tumbled 33 billion cubic feet in the week ending April 1, topping the market estimate of 26 billion cubic feet. Last week, US supplies rose 26 billion cubic feet.
In total, US supplies stand at 1.382 trillion cubic feet, down 399 billion cubic feet from the same time a year ago. They are also 285 billion cubic feet below the five-year average of 1.667 trillion cubic feet.
The lower storage levels, industry analysts say, has ignited the momentum for bulls, especially heading into the spring and summer seasons. This could support prices to trend even higher.
Does this mean that natural gas prices could touch $7?
Early estimates suggest that next week’s storage report could record an injection in supplies, although weather across the US this week has been a little bit cooler than normal. These numbers could be revised, but the early projections show as much as 30 billion cubic feet could be added to domestic supplies.
Meanwhile, market analysts contend that domestic for US natural gas is likely to increase in the coming months, but production and exploration has been falling behind. Still, experts forecast that prices could fall back to as low as $3 on the other end of this bull run.
In other energy commodities, May West Texas Intermediate (WTI) crude oil futures picked up $0.74, or 0.78%, to $96.98 per barrel. June Brent crude futures tacked on $0.69, or 0.69%, to $101.27 a barrel. May gasoline futures were flat at $3.0461 a gallon. May heating oil futures shed $0.0504, or 1.51%, to $3.2948 per gallon.