Natural Gas Swings After Rise in Stockpiles - The Wall Street Journal

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U.S. natural-gas inventories are 52% above their levels from a year ago. A gas flare... — U.S. natural-gas inventories are 52% above their levels from a year ago. A gas flare burning in a field near Mentone, Texas.
Photo: Bronte Wittpenn/Bloomberg News

May 7, 2020 11:29 am ET

Natural-gas prices swung between small gains and losses Thursday, pausing a recent recovery after weekly inventory figures showed a larger-than-expected increase last week.

Natural gas for June delivery was recently down 0.1% at $1.942 a million British thermal units. Despite a Wednesday slide, prices are up about 25% from a recent low hit on April 2. Some traders are hopeful that lower supply as a result of shut-ins of oil wells will spur a price rebound.

Many wells extract natural gas as a byproduct, but tumbling oil prices have forced companies to shut down productive projects.

The Glut Drowning the Oil Market

Still, some analysts are skeptical natural gas can continue climbing with demand still weak because of the coronavirus. Consumption for the heating and power-generation fuel typically falls in the spring, and many office buildings and other facilities remain empty due to the pandemic, denting demand even more.

The lost consumption is pushing up stockpiles. Thursday’s government data showed U.S. inventories rose 109 billion cubic feet last week, a bigger jump than the 106-bcf rise expected by analysts and traders surveyed by The Wall Street Journal. The increase was also well above the long-term average rise of 74 bcf for this time of year.

Inventories are now 52% above their levels from a year ago and 20.5% above their five-year average.

“Near-term demand struggles are so far outweighing supply disruptions,” analysts at Gelber & Associates said in a recent note.

A pipeline explosion in Kentucky had also lifted prices earlier in the week by lowering supply, but many analysts don’t expect shortages to persist.

Still, many traders expect prices to remain volatile, with hedge funds and other speculative investors trying to position for a long-term rebound as supply dwindles.

That has also been the case for oil, which continued its own wild ride Thursday. U.S. crude futures for June delivery rose 7% to $25.67 a barrel, extending their recent rebound with fuel demand slowly recovering and production dropping rapidly.

Brent crude futures for delivery in July, the global gauge of oil prices, advanced 2.8% to $30.56 a barrel Thursday.

The swings came after reports that Saudi Arabia will raise its prices for buyers in June and narrow the discounts they offer. The kingdom earlier in the year had sold oil at steep discounts as part of a March production feud with Russia that raised oil supplies as demand crashed.

The higher June prices are a sign of thawing tensions after the two sides and other large producers reached a pact to cut supplies and stabilize energy markets last month.