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US Natural Gas Update: Futures Rise Over 4% on Smaller Inventory Build

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US natural gas futures held onto earlier 4% plus gains in after-hours trading on Thursday after government data showed a smaller-than-expected storage build, prompting short covering in the market.

The front-month Henry Hub natural gas contract and the continuous contract both rose 4.19% to settle at $2.76 per million British thermal units.

The US Energy Information Administration reported that natural gas inventories increased by 79 billion cubic feet for the week ended April 24.

The injection was below the prior week's 103 Bcf build and the 105 Bcf addition recorded in the same week a year earlier. It was, however, 20 Bcf above the five-year average increase of 63 Bcf. Analysts had expected a build of up to 83 Bcf, making the reported figure a modest downside surprise.

The build pushed total working gas in storage to 2,142 Bcf, 116 Bcf, or about 6%, above year-ago levels and 153 Bcf, or roughly 8%, above the five-year average of 1,989 Bcf, from 7% last week.

Analysts attributed the price rebound largely to positioning. In a note, FX Empire said traders had anticipated another outsized injection following the previous week's triple-digit build, and the smaller figure triggered short covering.

Despite Thursday's gains, natural gas prices have been under pressure in recent sessions due to ample supply and weak seasonal demand. The EIA said the Henry Hub spot price fell 16 cents over the week ended Apr. 29 to $2.60/MMBtu.

Some supply-side tightening is beginning to emerge, however. Gelber & Associates noted that US production has been edging lower on a day-to-day basis, while reduced Canadian imports are contributing to a tighter near-term supply balance.

US dry gas production stood at 110.5 Bcf per day on Thursday, up 3.2% over the year, while demand reached 74.7 Bcf/d, up 9.6% from a year earlier, according to Barchart data, referencing BNEF.

On the export side, the EIA reported that 133 Bcf of LNG was shipped from the US during the week ended Apr. 29 aboard 35 vessels, down 1 Bcf from the previous week. BNEF data indicated that net flows to US LNG export terminals averaged 18.6 Bcf/d on Thursday, a 5.7% decline week-on-week.

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