The U.S. Energy Department's weekly inventory release showed a smaller-than-expected increase in natural gas supplies. However, the injection was higher than the five-year average and the year-ago rise. Therefore, despite a slight recovery, natural gas prices remained close to the lowest levels in three years because of growing fears that soaring production is outpacing demand growth.
Natural gas futures broke out of a two-week range to finish higher for the week with buyers getting help from a drop in production. Futures were dragged higher by strengthening forward prices, which rose despite the absence of early summer heat in the weather forecasts to drive demand.
Natural gas futures opened sharply lower on Monday and the subsequent selling pressure drove the market through the previous session's low, reaffirming the downtrend on the daily chart. However, the move took the market into a technical support zone and the selling pressure subsided at $2.726.
After some boring times in Summer and Fall, it has been a wild and crazy ride for natural gas prices this Winter 2018-2019. We have seen the most volatile U.S. gas market since 2009. Prices hit highs not seen since 2014 and lows not seen since 2016. Since November, prompt month gas prices have been in the very wide range of $2.55 to $4.85 per MMBtu. It was a cold and early start to winter in November, augmented by the fear of storage levels nearly 20% below the five-year average, that got the party started.
It was indeed remarkable that the U.S. natural gas market saw the lowest prices since July last week despite Polar Vortex 2019. In particular, given that gas demand peaks in the Winter when heating and power generation needs collide, the U.S. hit an all-time record of 150 Bcf/d of consumption.