US natural gas futures erased early losses and maintained higher prices in after-hours trade on Thursday after government data showed a smaller-than-expected increase in domestic gas inventories, triggering short covering and reinforcing expectations that the spring supply-demand balance may be tightening modestly.
Both the front-month Henry Hub futures and the continuous contract rose 1.90% to $2.782 per million British thermal units.
The US Energy Information Administration said natural gas inventories for the week ended May 1 rose by 63 billion cubic feet, below analyst expectations for a 72-80 Bcf build and under the five-year average increase of 77 Bcf for the week.
The bullish storage surprise prompted buying in front-month contracts after futures had traded lower ahead of the report, Barchart said.
Despite the smaller injection, supply levels remain ample. US gas inventories were 2.8% above year-ago levels and 6.7% above the five-year seasonal average.
The Energy Buyers Guide said the market will likely be focused on "whether this storage miss was a one-off or a harbinger of a more durable shift in the underlying fundamental balance".
Analysts at Gelber & Associates said the price lift "reinforced the idea that the spring balance is not quite as loose as consensus had assumed," the firm said, adding that the market still viewed the move as a near-term adjustment rather than the start of a sustained rally, noting that elevated inventories continue to limit upside potential for winter contracts.
"The rally is doing more to firm up summer risk than to meaningfully reprice next winter when storage remains above the five-year average," the firm said.
Analysts also pointed to competing forces in the broader market, with strong LNG exports supporting prices while robust domestic production continues to weigh on sentiment.
According to Barchart, citing data from BNEF, US lower-48 dry gas production on Thursday was estimated at 110.9 Bcf per day, up 4.5% from a year earlier. Demand across the lower 48 states was estimated at 71.0 Bcf/d, up 10.2% year over year.
Flows to US LNG export terminals were estimated at 17.7 Bcf/d, down 5.9% from the prior week due to maintenance slowdowns.
Gelber said the market can pop on a bullish storage surprise but still "needs either sustained heat, a more persistent slowdown in supply growth, or a string of smaller injections to make the move stick beyond the near-term contracts."