According to NAB Analyst Team, “Helping to explain this lift has been the sizeable winding down in inventories in recent months, with July being the third consecutive month that stocks have wound down as a solid consumption pace. Moreover the switch from coal to gas in electricity generation has generally been supportive.”
Looking ahead, it appears that natural gas prices of around US $1.80/mmbtu are a thing of the past. However, “we do emphasize that our outlook for Henry Hub prices is not too bullish, despite the recent lift in prices.” they add. First of all, prices will need to remain fairly low in order to encourage coal-to-gas switching in the September quarter. This is especially required given that forecast injections suggest that natural gas storage is likely to hit a record level come October and could seriously test storage capacity if prices are not competitive.