Today’s weekly US Energy Information Agency (EIA) natural gas report showed that US storage fell only 101 billion cubic feet (bcf) (which is 30% below normal). This builds on the high inventory levels I talked about last week to an even higher level of 1,885 bcf. Supplies are now 11.7% above the five-year average.

With winter drawing to a close within a few short weeks, supplies are poised to rise even higher compared to recent averages. This means the current price of ~$4 per MMBtu will probably drop. But a bullish factor on prices this week is the recent 10% increase in the price of oil. Oil and natural gas prices tend to co-move due to their ability to substitute each other as energy sources. A general rule of thumb is that oil’s price per barrel is roughly 10X natural gas’s price per MMBtu. Oil climbed above $140 per barrel last summer while natural gas almost hit $14 per MMBtu, and now the prices are $40+ to $4.

But with more recent numbers showing US manufacturing falling sharply, I believe natural gas may fall significantly below $4 even if oil climbs to $50 on fresh OPEC cuts (like the pullback that the UAE announced today).

It’s good for the climate for natural gas to substitute oil and coal. So I hope its price will remain low for at least several months before credit markets allow substitution by significant new wind and solar.

Onwards in the sustainable energy transition-