A 'Bullish Shock' To Natural Gas Supplies Just Sent Prices Exploding Higher

oil gas field fracking 4

Photo: Reuters

Natural gas prices are up more than 3 per cent this morning after the Energy Information Association (EIA) reported a drop in supplies.For the week ended March 1, U.S. reserves fell -146 billion cubic feet.

According to Citi’s Timothy Evans, the drop in supply was much higher than every forecast:

Citi Futures 120 bcf
Dow Jones Survey 131 bcf
Reuters Survey 134 bcf
Bloomberg Survey 134 bcf
Five-Year Average 102 bcf

Here’s the chart:

nat gas mar 7

Photo: Investing.com

Evans calls it a “bullish shock” to the market. Here’s his take:

The 146 bcf net withdrawal was significantly more than expected, a bullish shock to the market. ┬áThere were no reports of reclassifications and so this looks like a straight-up tightening of the background supply/demand balance for the period, with supportive implications that offset today’s milder temperature outlook. ┬áThe case for a rally to $3.70-3.80 is improved.

Prices are not expected to come down for a while.

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