Oil ends lower after hitting its highest levels in almost 11 months.
Natural-gas futures soared on Thursday to mark their highest settlement since late September, after a weekly report showed that supplies of the commodity rose less than the market expected.
Oil prices, meanwhile, finished lower after hitting their highest levels in almost 11 months, buoyed by global production disruptions and falling U.S. crude inventories.
July natural gas NGN16, -1.99% jumped 14.9 cents, or 6%, to settle at $2.617 per million British thermal units. The settlement was the highest for a most-active contract since Sept. 28, according to FactSet data. Prices were trading around $2.46 before the supply report.
Natural gas is ‘still cheap enough at these levels to drive decent power sector natgas consumption.’
Richard Hastings, Seaport Global Securities
Natural gas is “still cheap enough at these levels to drive decent power sector natgas consumption,” said Richard Hastings, macro strategist at Seaport Global Securities. Supply increases “have been trending below some of the big historical comparisons, largely due to coal-to-gas switching.”
Read: Here’s what’s propelling natural-gas futures to 7-month highs
The U.S. Energy Information Administration early Thursday reported that domestic supplies of natural gas in storage rose 65 billion cubic feet for the week ended June 3. That was below the average rise of 80 billion cubic feet expected by analysts polled by S&P Global Platts.
The smaller weekly increase “suggests that U.S. gas production is falling as we start to face record demand,” said Phil Flynn, senior market analyst at Price Futures Group. He said demand is 8% higher than a year ago, even though summer cooling demand for the commodity hasn’t yet begun.
Total stocks stand at 2.972 trillion cubic feet, up 660 billion cubic feet from a year ago and 722 billion cubic feet above the five-year average, the EIA data showed.
“Mexico is demanding more U.S. gas, a warm summer should boost power generation demand in the U.S., and production levels have been challenged so far in 2016,” said Robbie Fraser, commodity analyst at Schneider Electric. “That trio has sent prices higher, even as total storage and production levels remain considerably elevated.”
Meanwhile, after a three-session climb to the highest level in almost 11 months, oil futures pulled back Thursday as some analysts raised concerns that the recent price rally would prompt higher production.
July West Texas Intermediate crude CLN6, -2.39% shed 67 cents, or 1.3%, to end at $50.56 a barrel on the New York Mercantile Exchange. Prices settled Wednesday at $51.23, their highest since July 15 of last year.
August Brent crude LCOQ6, -2.25% on London’s ICE Futures exchange lost 56 cents, or 1.1%, to $51.95 a barrel after finishing Wednesday at $52.51, the highest futures settlement since October.
“Although there is potential for a small decline to develop into a more significant drop, so far this looks like a modest technical correction following three days of gains rather than a major reversal,” said Tim Evans, energy analyst at Citi Futures and OTC Clearing.
But some were even less optimistic.
There is a real risk that rising profitability may encourage more production, said Barnabas Gan, economist at OCBC Bank, cautioning that the oil price slump over the past few months had after all been triggered by a flood of oil supplies.
Read: Can rallying oil avoid repeat of 2015 summer selloff?
Data from the U.S. Energy Information Administration Wednesday showed that U.S. crude stockpiles fell by 3.2 million barrels last week, but total crude output increased by 10,000 barrels, raising questions about whether the rebounding market is already leading U.S. producers to pump more.
Prices have climbed as global output has declined. Unplanned global-oil supply disruptions averaged more than 3.6 million barrels a day in May 2016—that’s the highest monthly level recorded since the EIA started tracking global disruptions in January 2011.
Elsewhere in the energy market, gasoline for July RBN6, -3.57% finished less than half a cent lower at $1.619 a gallon, while July heating oil HON6, -1.84% fell 1.9 cents, or 1.2%, to $1.551 a gallon.
–Sara Sjolin contributed to this article.