Natural gas jumps almost 5%, after 5-day selloff to below $4

© Reuters.

By Barani Krishnan

Investing.com -- Has the gas bull caught a break?

It’s still early to tell, but Wednesday’s near 5% rebound in natural gas futures on the New York Mercantile Exchange’s Henry Hub threw a lifeline to those long the market — after five straight days of selling that took the fuel’s pricing beneath key $4 support, wiping out a quarter of its value.

“NYMEX gas futures prices have slowed their capitulation, and signs of being oversold are emerging,” Houston-based energy markets consultancy Gelber & Associates said, adding that the final arbiter for direction would be weekly gas storage data due on Thursday.

Henry Hub’s front-month gas, February, settled at $4.172 per mmBtu, or metric million British thermal units, up 18.40 cents, or 4.6%, on the day. February gas lost almost $1.30 over five previous days of trading, crashing below the $4 per mmBtu support on Tuesday.

It has been a dramatic fall from grace for America’s premier winter heating fuel, which just in December stood at a relatively high $7 per mmBtu, after a 2022 peak of $10 in August.

Natural gas managed to finish 2022 up by 22% — as ironic as that seems — as bulls played on the psyche of a market likely to be caught undersupplied in an extreme winter condition. Neither of those two superlatives came to fruition — storage of U.S. natural gas ended 2022 little changed from the closing levels of 2021, while the 2022/23 winter has thus far felt like an extension of autumn, albeit a little warmer.

“The underlying supply/demand imbalance has shifted to the bearish side of the spectrum as projected daily natural gas storage withdrawals will remain bearish versus the five-year average through at least January 12,” Gelber, the consultancy, said in its note.

“As such, it will be a hard-fought battle for estimated gas storage to fall below 2,700 billion cubic feet by mid-January, while it’s not out of the question that the storage deficit versus the five-year average could transition to a surplus in the same timeframe.”

Europe's wholesale natural gas prices, meanwhile, plunged for a second day in a row on Wednesday to their lowest level since their record highs after Russia invaded Ukraine in late February 2022.

A mild winter has enabled European Union countries to tap less gas from stocks that were built up in anticipation of cuts in supplies from Russia, which was the E.U.’s main supplier before the war.

The benchmark European gas contract — Dutch TTF gas futures for the coming month — soared to a record $367 per megawatt-hour in March and was as high as $364 in August. On Wednesday, it fell below $75 — more than 50% down from a month ago and the lowest level since before the war on February 21.