Natural Gas Bulls Find Hope After Woeful Year
Investing.com – The natural gas market is finally seeing a glimmer of hope after a year of disappointment. America’s favorite fuel for indoor heating and cooling has managed to hold steady at $3 pricing, thanks to double-digit gains in futures on the New York Mercantile Exchange’s Henry Hub for the second consecutive week.
Improved Prospects for Natural Gas
The turnaround in natural gas pricing comes as a result of favorable weather conditions, increased demand, and synchronized production. Throughout most of the year, natural gas had been stuck at mid-$2 levels, but these recent developments have supported higher pricing.
The bullish sentiment has been further boosted by storage data, which showed a smaller-than-expected build last week. Lingering warmth before the arrival of cooler fall temperatures led to an increase in air-conditioning demand, which helped to alleviate concerns about oversupply.
Factors Driving the Gas Rally
Houston-based energy markets advisory firm Gelber & Associates attributed the recent surge in prices to the state of storage as winter approaches. Weather projections for November, December, and January suggest temperatures that are not excessively cold, providing further optimism.
Although the market remains cautious about the possibility of an unseasonably warm winter with limited heating demand, recent storage data has tightened the market on the supply side. Despite the warm winter predictions, concerns about storage levels have significantly impacted market sentiments, pushing prices above the $3 hurdle.
The most-active November gas contract on the New York Mercantile Exchange’s Henry Hub settled at $3.3380 per mmBtu, marking a 5.4% increase on the day and a 14% gain for the week.
Encouraging Storage Data
Gas prices continued to rally after the Energy Information Administration (EIA) reported a storage build of just 86 billion cubic feet (bcf) for the week ending September 29. This was below the 92 bcf expected by industry analysts and the previous week’s build of 90 bcf.
While total gas storage in the US is currently 11.6% higher than a year ago, inventories on a five-year basis are only 5.3% higher. This tightening of inventories has contributed to the recent surge in prices.
Gas Bulls’ Hard-Fought Victory
Gas futures have made a remarkable recovery since hitting sub-$2 levels in April. With favorable weather conditions, increased demand for liquefied natural gas (LNG), unexpected pipeline outages, and record production, gas prices have climbed approximately 70% since their low point.
Despite the challenging journey, gas bulls have finally managed to surpass the elusive $3 mark. Prior to October, gas prices had only briefly reached $3 in March and August due to weather-related factors.
