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U.S. natural gas futures fell sharply on Thursday following data that showed a larger-than-expected injection into storage left inventories 38% above the five-year average for the week.
The Energy Information Administration reported that natural gas in U.S. underground storage increased by 24 billion cf to 2.28 trillion cfs in the week ending April 5, which matched the five-year average but easily exceeded expectations for an 11 billion cf injection forecast by analysts surveyed by The Wall Street Journal.
Given the current glut of natgas, the EIA expects benchmark prices to remain below $2/MMBtu during the first half of this year and to average $2.20/MMBtu in 2024, declining compared to a previous forecast of $3.20.
Wall Street is a little less bearish but is also adjusting price forecasts; This week UBS cut its 2024 US price estimate from $3 to $2.54/MMBtu.
For next year, UBS expects US natural gas to rise to $3.50 a barrel, as new export capacity and demand to power data centers is expected to turn the current surplus into a deficit of more than $1 billion of cubic meters/day.
Nymex natural gas near-term (NG1:COM) for May delivery set -6.4% to two-week low $1.764/MMBtu.
Meanwhile, crude oil futures fell as first-month Nymex (CL1:COM) crude deliveries for May concluded -1.4% at $85.02/barrel and June Brent crude oil (CO1:COM) closing for the first month -0.8% to $89.74 a barrel, the third loss in the last three sessions for both benchmarks.
ETFs: (NYSEARCA:UNG), (BOIL), (KOLD), (UNL), (FCG), (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
According to Vikas Dwivedi, energy strategist at Macquarie, Brent crude will struggle to stay above $90 a barrel in the second half of this year without an actual supply disruption due to geopolitical events.
“Consequently, we expect oil to turn bearish throughout the year due to growth in non-OPEC supply, a significant amount of OPEC+ spare capacity re-entering the market, and the potential for continued inflation to weaken the question,” writes Dwivedi.