NYMEX June natural gas settles at 14-week high for prompt contract on bullish expectations

Houston — The NYMEX June natural gas futures contract settled 10.30 cents higher at $1.993/MMBtu on Monday as collapsing US rig counts highlight expectations of lower associated gas production.

Monday's settlement was the highest prompt-month close since January 17, the last session a front-month contract settled above $2/MMBtu.

The last 14 weeks have been the longest, uninterrupted stretch of sub-$2/MMBtu prices for the prompt-month NYMEX contract in the last 20 years. The next longest was 38 days between February 11, 2016 and April 6, 2016.

David Thompson, executive vice president at Washington-based brokerage Powerhouse, identified Friday's intraday high of $2.016/MMBtu as the critical resistance level for the contract. "If we can punch through that, we are now looking at natural gas prices around $2."

He added: "$2 has been the cap on price rallies in late February and early March, and most recently, a couple times toward the end of April."

The stronger NYMEX prompt-month price is being driven, in part, by a combination of the approach of the summer gas demand season and expectations of lower associated gas production, according to sources.

With crude prices still in the doldrums, a wave of US oil and gas companies have announced production cutbacks. A 48% drop in total active US rigs since March 11 has underscored these announcements, with rig data provider Enverus putting the total number of operational US rigs at 432 as of April 29.

The reduction in rigs has been particularly felt in the Permian Basin, which saw a drop of 33 rigs to 229 rigs last week, according to Enverus. This is down from 429 rigs active in the first week of March. In a first-quarter 2020 earnings call Friday, ExxonMobil said it would be reducing its total number of rigs active in the Permian by 75% this year to 15 rigs.

The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm ET (2300 GMT).