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Natural Gas Rallies 2% As Prices Post a Double-Digit Gain in April

April 30, 2020 at 15:36 by Andrew Moran

Natural gas futures are rallying more than 2% on Thursday after the US government reported an increase in domestic inventories that matched market forecasts. The central development for the natural gas industry over the next month is storage levels amid a collapse in demand due to the COVID-19 pandemic. Could prices test $2 in the coming weeks?

June natural gas futures surged $0.04, or 2.14%, to $1.909 per million British thermal units (btu) at 15:18 GMT on Thursday on the New York Mercantile Exchange. The energy commodity is poised for a weekly drop of more than 2%, but it will record a monthly gain of about 23%. Year-to-date, natural gas is still down nearly 13%.

According to the US Energy Information Administration (EIA), domestic stockpiles climbed by 70 billion cubic feet for the week ending April 24. The median estimate called for a jump of 69 billion cubic feet. In total, inventories stand at 2.21 trillion cubic feet, up 783 billion cubic feet from the same time a year ago. They are also 360 billion cubic feet above the five-year average.

Industry observers say that the next test for the sector will be storage levels. With demand destruction still paramount in the global economy, and average weather patterns throughout North America and Europe, analysts are sounding the alarm about ballooning storage volumes. In the immediate term, demand destruction for the energy supply could outweigh production losses.

EBW Analytics Group wrote in a report that the surplus compared to the five-year average could double to more than 700 billion cubic feet by July 4.

If storage increases at this dramatic rate, it may match the 2018 annual peak of 3,247 Bcf by June. While uncertainty remains high, any rapid storage increases of this nature are likely to put fall storage constraints in focus and potentially weigh on Nymex natural gas futures.

Liquid natural gas (LNG) demand has also cratered with nearly two-dozen US cargoes canceled for June.

In other energy commodities, June West Texas Intermediate (WTI) crude oil futures surged $3.07, or 20.39%, to $18.12 per barrel. June Brent crude futures picked up $2.25, or 9.29%, to $26.48 a barrel. June gasoline futures tacked on $0.0431, or 5.73%, to $0.7978 a gallon. June heating oil futures added $0.0722, or 9.24%, to $0.8482 per gallon.

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