Meanwhile, Baker Hughes reported that the number of rigs drilling for natural gas in the U.S. fell by three to 222 last week.
Natural Gas Rig Count
Bottom Line: The latest inventory data from the EIA were bearish, as the inventory surplus against the five-year average increased from 15 to 36 bcf and the inventory surplus against a year-ago increased from 734 to 738 bcf.
Despite mounting inventories, natural gas rallied sharply this week thanks to soaring temperatures across the country.
Rising power demand is likely to reduce injections in the coming weeks. Additionally, some traders are speculating that U.S. natural gas production may be topping out; the EIA's latest survey of producers showed that output in the lower 48 states fell about 2.5 bcf/d in the first quarter from 83.4 bcf/d in December to 80.8 bcf/d in March.
If production is indeed rolling over, the market may tighten in the coming months, but it's much too early to call a turn in the market. The latest storage build suggests that the market remains oversupplied for now.
In fact, it's still likely that inventories will shatter all records this summer and fall, and that prices will dip to even lower levels before the bear market in natural gas ends.