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U.S. natural gas futures fell sharply Thursday following data that showed a larger than expected injection into storage that left inventories 38% above the five-year average for the week.
The Energy Information Administration reported natural gas in U.S. underground storage rose by 24B cf to 2.28T cf in the week ended April 5, which matched the five-year average build but easily topped expectations for an 11B cf injection forecast by analysts surveyed by The Wall Street Journal.
Given the current natgas glut, the EIA said it now expects benchmark prices to remain below $2/MMBtu through this year’s H1 and to average $2.20/MMBtu in 2024, down from an earlier forecast of $3.20.
Wall Street is somewhat less bearish but also is adjusting price forecasts; UBS this week cut its 2024 U.S. price estimate to $2.54/MMBtu from $3.
For next year, UBS forecasts U.S. natgas rising to $3.50/bbl, as new export capacity and demand to power data centers are expected to flip the current surplus to a deficit of more than 1B cf/day.
Front-month Nymex natural gas (NG1:COM) for May delivery settled -6.4% at a two-week low $1.764/MMBtu.
Meanwhile, crude oil futures fell, with front-month Nymex crude (CL1:COM) for May delivery finishing -1.4% to $85.02/bbl and front-month June Brent crude (CO1:COM) closing -0.8% to $89.74/bbl, the third loss in the past three sessions for both benchmarks.
ETFs: (NYSEARCA:UNG), (BOIL), (KOLD), (UNL), (FCG), (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
Brent crude will have trouble holding above $90/bbl in this year’s H2 without actual supply disruption from geopolitical events, according to Macquarie energy strategist Vikas Dwivedi.
“As a result, we expect oil to turn bearish as the year progresses due to non-OPEC supply growth, a material amount of OPEC+ spare capacity re-entering the market, and the potential that continuing inflation softens demand,” Dwivedi writes.
