Natural gas prices on hot streak as glut eases, demand higher: RBC By Investing.com

Investing.com — U.S. natural gas prices have been on a hot streak of late, fueled by a bullish wave of rising energy demand and a shrinking supply glut.

“The more bullish scenario is starting to play out, with natural gas stocks moving toward average levels from a nearly 450 bcm (billion cubic meter) surplus earlier this year,” RBC analysts said Capital Markets in a note on Thursday.

they have rallied recently, approaching $3.00 per million British thermal units, or MMBtu.

The bullish backdrop for natural gas prices is starting to take shape, the analysts added, as inventories are “moving toward average levels from a surplus of nearly 450 Bcf earlier this year.”

The Energy Information Administration on Thursday reported US storage injection of 55 Bcf for the week ended Sept. 28, below consensus expectations of 59 Bcf.

Total working storage now stands at 3,547 Bcf, 127 Bcf higher than last year’s 3,420 Bcf and 190 Bcf higher than the 5-year average of 3,357 Bcf.

Heading into the fall, RBC estimates that peak storage will likely reach 3.9 trillion cubic feet, or Tcf, which is 150 Bcf above the 10-year average.

In addition to falling inventory levels, strong energy demand and the visibility of increased LNG exports are another tailwind for natural gas prices, analysts said.

Weather forecasts predict that most of the US will experience above-average temperatures, while the East Coast is experiencing a mild cold front, which could increase demand from both a heating and cooling perspective.

The upbeat backdrop for natural gas prices has helped natural gas stocks rise 12 percent year-to-date, outperforming oil-focused stocks, which have fallen 4 percent, analysts said.

Natural gas stocks currently reflect a price of about $5.02/Mcf, well above the 5-year range of $3.50/Mcf, they added.