Unexpected rise in U.S. natural gas storage pressures prices

U.S. natural gas storage inventories rose by 63 billion cubic feet in the week ended May 10, the Energy Information Administration reported on Thursday. The build surpassed analyst expectations of a 59 bcf increase, according to a Reuters poll, and marked the largest weekly gain since early April.

Henry Hub front-month futures fell 3.2% to $2.21 per million British thermal units immediately after the data release, extending declines from the prior session. Traders cited the unexpected surplus as a bearish signal, with storage levels now 15% above the five-year average for this time of year.

The surplus reflects a combination of milder-than-normal weather and reduced industrial demand, analysts said. Power sector consumption, typically a key driver of seasonal storage builds, remained subdued due to lower cooling demand in southern states. Liquefied natural gas export facilities also operated below capacity, further limiting withdrawal pressures.

The EIA’s report follows a string of bearish data points for the U.S. gas market, including last week’s downward revision to production estimates. The agency now projects domestic output to average 103.5 bcf per day in 2024, down from its prior forecast of 104.1 bcf.

Market participants will monitor next week’s storage data closely, as the summer injection season approaches. Storage levels are currently at 2.3 trillion cubic feet, providing a cushion against potential supply disruptions but also limiting upside price potential.