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Natural gas surges to nine-month high as supply gains fall short

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Natural gas futures jumped to a nine-month high Thursday after government data showed a supply gain fell short of analysts’ estimates.

Gas stockpiles climbed by 65 billion cubic feet last week, compared with a median forecast of 76 billion in data compiled by Bloomberg.

Natural gas has surged from a 17-year low in March on speculation that a sweltering summer will boost demand for the fuel from power plants as explorers in shale reservoirs curtail production. The energy rout has pushed the number of rigs drilling for gas in the U.S. to the lowest since at least 1987.

Last week’s storage gain “is a very low number, especially considering the fact that demand is usually lower during Memorial Day weekend,” said Kyle Cooper, director of research at IAF Advisors and Ion Energy in Houston. “We’re certainly seeing increased power demand, and supply looks like it’s trending downward.”

Natural gas for July delivery rose 14.9 cents, or 6 percent, to $2.617 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Sept. 17. Prices are up 12 percent this year.

Gas production in the lower 48 states is down 1.5 percent from a record 82.81 billion cubic feet a day in February, data from PointLogic Energy show.

Also, natural gas exports from Cheniere Energy’s Louisiana terminal are starting to affect supplies. Based on the capacity of 11 LNG tankers that have set sail from Cheniere Energy’s Louisiana terminal since late February, 36.89 billion cubic feet has been exported, Bloomberg New Energy Finance analyst Anastacia Dialynas said in an e-mail.

“Anything easing the glut helps, and LNG exports are helping,” said Moses Rahnama, an analyst at London-based consultants Energy Aspects. “‘Expectations of higher LNG exports are also moderately bullish.”

Sabine Pass has 17 billion cubic feet of gas storage on site. Gas deliveries to the terminal have helped maintain storage “right around maximum capacity,” Dialynas said.

For now, exports “have had a marginal impact” in terms of total U.S. gas demand and the recent price rally, said Jason Schenker, president of Prestige Economics in Austin. “The decline in U.S. shale gas production — and the decline in associated gas as a result of U.S. shale oil production — have been more significant in preventing inventories from surging higher.”

TAGS: shale, oil, gas, energy

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