U.S. natural gas futures decline as expectations grow that the inventory deficit will soon turn into a surplus.
A bigger-than-expected storage build of 88 Bcf last week, aided by strong solar and wind power generation, contributes to the bearish outlook.
Weather patterns, including milder temperatures across much of the U.S., are also putting downward pressure on prices.
Natural Gas Futures Slide Amid Positive Storage Data
U.S. natural gas futures experienced a notable decline, pressured by a larger-than-expected storage build for the previous week. The 88 billion cubic feet (Bcf) injection, which surpassed estimates, has fueled expectations that the inventory deficit compared to the five-year average will soon flip into a surplus.
NatGasWeather.com, in its report, highlighted that the record levels of solar power generation and robust wind energy likely contributed to the above-estimate storage build. Additionally, the forecaster pointed out that milder-than-usual temperatures across the United States have kept demand for natural gas low. “Bearish weather patterns have been weighing on prices the past couple of weeks as near-perfect temperatures rule most of the U.S.,” the report stated.
As a result, Nymex natural gas futures closed down 3% at $2.930 per million British thermal units (mmBtu), marking the lowest settlement since mid-November. However, prices managed to recover slightly from the day’s low of $2.858 following the storage report.
Market Awaits Weekly Storage Data
Natural gas futures continued their downward trend as traders awaited weekly storage data from the U.S. Energy Information Administration (EIA). The early start to the injection season, coupled with unusually mild weather in March and April, has helped shrink the inventory deficit against the five-year average to just 74 Bcf, down from 230 Bcf earlier this year. The growing expectations of a surplus in the coming weeks have led to a drop of more than $1 in Nymex gas prices this month.
Analysts surveyed by the Wall Street Journal predict that storage increased by 62 Bcf last week, which would further narrow the deficit to 70 Bcf. As of the latest data, Nymex natural gas traded 4.1% lower at $2.899 per mmBtu.
European Gas Prices Slip as Storage Concerns Ease
Meanwhile, European natural gas prices also saw a slight decline, with the benchmark Dutch TTF contract falling 0.5% to 34 euros per megawatt-hour. This drop comes as concerns about storage refilling efforts ease, bolstered by higher import volumes aimed at replenishing inventories.
Analysts at ANZ Research noted that European Union storage is currently 37.5% full, and the region needs to purchase nearly 30% more gas than usual to meet its mandatory storage levels. However, the report also pointed out that Asian buyers are becoming more active as they prepare for summer demand, with price parity favoring the region for receiving liquefied natural gas (LNG) cargoes.
Despite these efforts, the ongoing concern about potential demand weakness due to tariffs remains a factor weighing on European gas prices. As the region aims to fill its storage and prepare for the winter months, the balancing act between higher imports and weaker demand will continue to influence market sentiment.
