- Stockpiles expanded last week by less than analysts expected
- Producers are pulling back after this year’s price drop
According to Bloomberg article published on May 18, 2023, natural gas futures soared to the highest in more than two months as a smaller-than-expected US stockpile increase stoked concern about tighter supplies, spurring traders to exit bearish bets.
Gas rose as much as 11% after government data showed that inventories expanded by less than forecast last week. The report came just days after a separate tally showed a collapse in the number of rigs drilling for the fuel, signaling that producers are pulling back after this year’s plunge in prices.
Cheap gas is also stoking demand for the fuel, with power generators boosting consumption to the highest seasonal levels in at least nine years. Warmer-than-normal temperatures through the end of May are expected to keep gas demand elevated as consumers begin to crank up air conditioners.
Gas is staging a turnaround after a mild winter and ample stockpiles in the US and Europe sent prices tumbling about 50% from the beginning of the year. But US inventories remain above normal, leaving the market vulnerable to a sharp pullback unless a hot summer materializes in the northern hemisphere.
While storage figures were “certainly a shocker and chased some shorts from the market,” there’s limited upside for prices in the near term, said Gary Cunningham, a director at risk management firm Tradition Energy. “We should see some producers come in to help supply the short covering, which should limit any real rally.”
