U.S. Natural Gas Pushes Futures Soar 6% on Storage Report
Natura gas prices are way up for Thursday after a new EIA report showed a lower than expected inventory build for last week.
Quick overview
- LNG prices surged to $3.29 per MMBtu after a smaller-than-expected storage increase reported by the EIA.
- Production facilities added 92 billion cubic feet of gas to storage, falling short of the forecasted 96 bcf and last year's 104 bcf.
- Despite high inventory levels, which are 6.2% above the five-year average, investor concerns remain due to lower demand during warmer months.
- Future production may increase as maintenance at export facilities concludes, although some producers are intentionally slowing output to manage inventory levels.
LNG prices jumped Thursday after the weekly EIA (Energy Information Administration) report showed a storage increase that was smaller than expected.
LNG production facilities added 92 billion cubic feet of gas into storage for last week, and that was less than the forecasted 96 bcf. That is also lower than the injection of 104 bcf recorded for the same week last year, and the effect on the LNG market has been to bring prices up.
Inventories of natural gas are still high in the United States- up about 6.2% from the average over the last five years. Those elevated levels have worried investors, especially during the warmer period of the year when there is less demand for natural gas.
Massive Jump for U.S. LNG Rates
The price increase on Thursday brought natural gas up to $3.29 per MMBtu as inventory levels reached 2.483 trillion cubic feet. That EIA report caused the biggest price jump the industry has seen in a while.
Gas production is lower for much of the United States than it was in April. For May, domestic production fell to 109.4 bcfd. That is a small drop from April’s 109.8, but any decrease pushes the rates up, especially when investors are watching the elevated inventory levels closely for any sign of change.
Crude oil actually rose slowly today in comparison to domestic LNG. West Texas Intermediate was up 0.62% at the time of writing, hitting $89 per barrel. Brent crude is another key benchmark of the global market, and the price per barrel there fell 0.43% to $93.88.
Production may climb for late May and early July in the domestic LNG market since export facilities are closing off their spring maintenance plans. The scheduled cleaning has mostly finished by now, so facilities can start back production, although some of the major U.S. natural gas producers are purposely slowing down production at some facilities to make up for the higher than normal inventory levels.
For the weather in the coming weeks, forecasts point to mild, fairly normal temperatures that will not tax air conditioners very much. Those temperatures should hold through the first couple weeks of June, keeping demand at a minimum for the LNG market.
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