Natural gas-related exchange traded funds climbed Thursday, with natgas prices hitting a 13-year high, as tight energy supplies keep prices elevated.
The United States Natural Gas Fund (NYSEArca: UNG) rose 5.4% on Thursday and increased 65.5% year-to-date. Meanwhile, Nymex natural gas futures were up 5.5% to around $6.36 per million British thermal units.
U.S. natural-gas prices are “sensitive to any near-term supply concerns created by events like a ban on Russia coal exports, abnormally cold weather,” or Russian natural-gas export issues, given tight global supplies, Rob Thummel, portfolio manager at Tortoise, told MarketWatch.
Fueling the surge on Thursday, the U.S. Energy Information Administration revealed a higher 33 billion cubic feet withdrawal rate from storage inventories for the week ended April 1, Natural Gas Intelligence reports.
With the latest storage report, we are at the close of the traditional withdrawal season, leaving inventories well below historical levels and reigniting the bullish momentum.
“Low number for storage…going to be an interesting summer,” one participant on The Desk’s online energy chat Enelyst told Natural Gas Intelligence.
“Not the number you want to see if you are in the big spring injection camp,” another participant added.
Natural gas prices have also been rallying on the broad surge in energy prices, with a close competing alternative coal also trading at its highest level since 2008, according to EIA data. Due to the strong run-up in coal prices, many electricity producers have been shifting back to natural gas.
Coal usually “displaces” natural gas when natural gas becomes expensive, or vice versa, Thummel added. In the current market environment, global coal inventories are at lows and global production has been declining due to the increased wariness of the environmentally polluting energy source.
Further fueling the supply side issues, Europe has proposed a ban on Russian coal imports in response to its invasion of Ukraine. The Group of Seven leaders said in a statement Thursday that they will “expedite our plan to reduce reliance on Russia for our energy, which includes phasing out and banning Russian coal imports.”
Thummel noted that the ban on Russian coal would further reduce coal inventories and raise prices on the commodity, along with supporting natural gas as an alternative.
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