Commodities Corner: Natural-gas prices up over 14% in March, but the gains aren’t built to last

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Markets/commodities reporter

Natural-gas futures ended March with a more than 14% climb — the best monthly performance in more than two years — but the commodity likely won’t enjoy its newfound gains for very long.

Natural gas futures NGK16, -1.70% settled at $1.959 Thursday on the New York Mercantile Exchange, for a March gain of roughly 14.5%, according to FactSet. That was the largest monthly climb since January 2014, but they still lost about 16.2% for the quarter.

The market has likely seen its final weekly U.S. inventory decline ahead of the so-called injection season — the time of year when supplies of natural gas begin to rise.

Supplies of natural gas in storage fell 25 billion cubic feet to 2.468 trillion cubic feet as of the week ended March 25, according to data from the Energy Information Administration released Thursday.

In fact, injection season — the time when supplies build up ahead of demand for summer cooling and next winter’s heating needs — may already be under way. For the week ended March 18, natural-gas supplies climbed by 15 billion cubic feet to mark the first weekly increase of the year, EIA data showed.

It “was a little early for an injection, but not uncommon,” said James Williams, energy economist at WTRG Economics. It was mostly weather related, he said.

Injection season comes not long after natural-gas futures touched their lowest levels in about 17 years. On March 3, futures prices settled at $1.639 per million British thermal units.

Read: Natural-gas futures sink to 17-year low

A generally mild winter kept domestic inventories at a high level. Natural-gas stockpiles are about 1 trillion cubic feet above the year-ago level and 843 billion cubic feet above the five-year average.

In terms of supplies, the next few weeks “can go either way,” said Richard Gechter, a director at Twin Eagle.

In the past, “we have had some cold snaps into late April,” he said. “Once we are near May, we may see an injection below estimates,” but a withdrawal would be a surprise.

As of about mid-March, natural-gas storage was at about 57% full, according to Beth Sewell, managing partner at Quantum Power & Gas Services. Storage levels had ended last year at 1.462 trillion cubic feet, or 35% full.

The market has seen some liquefied natural gas exports, but “not enough has shipped to make a dent in supply/demand balances, so I still think $1.50 is possible in the next month or two,” she said. Futures prices haven’t traded that low since 1995.

Read: Natural gas may drop to a more than 20-year low

Williams said prices could fall to as low as $1.60, but he wouldn’t rule out the potential for a rally, possibly in the fall.

By then, production will be lower, and if there is higher-than-normal summer consumption, prices could see a “substantial” increase, said Williams.

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