Gas Prices Stabilize as Storage Build Falls Short of Expectations

Natural gas prices have been recovering from their July lows, but the market's underlying dynamics suggest that this rally may be short-lived. On Friday, natural gas traded around $2.79 per million British thermal units (MMBtu), up over 2% and heading for a second consecutive weekly advance.

However, Thursday's storage print was the most constructive number in months, with a 16 Bcf injection into working gas storage for the week ending August 14. This build undershot both the 19 Bcf increase from last year and the five-year average of 29 Bcf by 13 Bcf.

Despite this bullish inventory print, futures floundered anyway, with the front month slipping to $2.72 on Thursday as the market sized up a fundamental backdrop defined in large part by ample supply. Daily cash prices lost ground across the board.

The EIA's own forecast now sits below where the market trades, with the agency cutting its third-quarter Henry Hub projection to $2.87 per MMBtu in the August Short-Term Energy Outlook. This reduction in demand and increasing production will likely keep a lid on prices in the near term.