Natural gas (/NG) has experienced strong buying pressure from the April lows as the injection season has begun and summer weather forecasts come more into focus. Natural gas is the most abundant resource in the United States, and improvements in shale extraction technology have significantly enhanced the extraction processes. In some regions, particularly in the northern United States, natural gas is flared due to a lack of infrastructure and high breakeven levels that deter infrastructure investment. This abundance has been a primary reason for downward price pressure over time. However, recently, a healthy bull trend has emerged in natural gas.

In the last two quarters, many U.S. natural gas producers have reduced their capital expenditure (cap-ex) spending guides for natural gas infrastructure to tighten supplies and stabilize prices. We may now be seeing the results of this throttling. Based on last week’s data from the EIA, net injections totaled 98 Bcf (billion cubic feet), which is 4.8% below the five-year average and 6.6% lower than last year’s level.

The market is also seeing continued rising demand for LNG, especially in the Asia-Pacific region. As capacity for LNG infrastructure comes back online, this may help stabilize natural gas prices through the summer months. Despite this, inventory levels remain elevated, with working natural gas stocks 25% higher than the five-year average and 15% higher than last year’s levels.

With short covering and positive supply developments for bulls keep your eye on the price action to see if this bull trend can continue.

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