Natural-gas prices rallied Thursday after data showed a smaller-than-expected weekly climb in U.S. inventories, but with total supplies matching a record level set three years ago, analysts don’t expect the gains to last.
December natural gas NGZ15, -0.21% jumped 10.2 cents, or 4.5%, to settle at $2.364 per million British thermal units on the New York Mercantile Exchange. The settlement was the highest for a most active contract since Oct. 22.
Prices added to earlier gains, bucking a trend lower for oil, after data from the U.S. Energy Information Administration showed natural-gas supplies rose 52 billion cubic feet for the week ended Oct. 30. Analysts polled by Platts were looking for a climb between 55 billion and 59 billion cubic feet.
Shortly after the data were released, Tim Evans, an energy analyst at Citi Futures, referred to the supply increase as a “third consecutive bullish-side miss,” noting that the “market looks somewhat less oversupplied.”
But total supplies now stand at 3.929 trillion cubic feet—tying the record reached for the week ended Nov. 2, 2012, according to EIA data.
For the market, tying the record may not have been a great surprise, said Phil Flynn, senior market analyst at Price Futures Group. “The market had been talking about a record.”
He also pointed out that the so-called injection season, the period during which natural-gas supplies build up in preparation for a winter-related spike in heating demand, may be over. That implies that supply declines are on tap.
Richard Gechter, Jr., principal and president of Richard W. Gechter Natural Gas Consulting, however, referred to the price rally as “a head fake.”
“There is so much product out there and no demand, that [supplies may continue to climb] until very cold weather sets in across a large region” and draws down inventories, he said.
“You may start to see production shut in, if storage is full and we have no [demand-supportive] weather,” said Gechter. But “some wells cannot be shut in” because building pressure can damage a well and “this again is not good news.”