Natural gas prices increased by 2.38% to close at Rs 284, reflecting a favorable market response to reduced production levels and a storage injection report from the U.S. Energy Information Administration that met expectations. The EIA indicated that utilities added 85 billion cubic feet of gas to storage for the week ending May 8, aligning with market expectations and falling short of the 109 bcf increase noted in the corresponding week of the previous year.

Current inventory levels have increased to 2.290 trillion cubic feet, which is 2.3% higher than the levels observed a year ago and 6.5% above the five-year seasonal average. This suggests that supply conditions remain relatively comfortable, even in light of recent output tightening.  Price support primarily stemmed from a reduction in U.S. natural gas production. Output in the Lower 48 states continued to decline as producers reduced activity in response to persistently low spot prices. Daily production has decreased to a 15-week low, indicative of a deceleration in drilling activity and adherence to supply discipline by leading producers.

Simultaneously, gas flows to significant LNG export terminals have decreased from a peak of 18.8 bcfd in April to approximately 17.0 bcfd in May, attributed to seasonal maintenance activities at facilities including Freeport LNG and Golden Pass. Weather forecasts indicating predominantly average temperatures until late May have constrained anticipations for significant cooling demand in the short term. Meanwhile, the EIA upheld its long-term optimistic production forecast, anticipating U.S. dry gas output to increase from 107.7 bcfd in 2025 to 110.6 bcfd in 2026 and 115 bcfd in 2027.

From a technical perspective, the market is experiencing renewed buying activity, evidenced by a 17.84% increase in open interest, which has settled at 23790, alongside a price increase of Rs 6.6. Natural gas is experiencing support at Rs 279.1, with additional downside support identified at Rs 274.3. Resistance is identified at Rs 287.3, and an upward movement beyond this threshold may drive prices towards Rs 290.7.