A 'Bullish Shock' To Natural Gas Supplies Just Sent Prices Exploding Higher

ReutersNatural gas prices are up more than 3 percent this morning after the Energy Information Association (EIA) reported a drop in supplies.

For the week ended March 1, U.S. reserves fell -146 billion cubic feet.

According to Citi's Timothy Evans, the drop in supply was much higher than every forecast:

Citi Futures 120 bcf
Dow Jones Survey 131 bcf Reuters Survey 134 bcf Bloomberg Survey 134 bcf Five-Year Average 102 bcf

Here's the chart:

Evans calls it a "bullish shock" to the market. Here's his take:

The 146 bcf net withdrawal was significantly more than expected, a bullish shock to the market. There were no reports of reclassifications and so this looks like a straight-up tightening of the background supply/demand balance for the period, with supportive implications that offset today's milder temperature outlook. The case for a rally to $3.70-3.80 is improved.

Prices are not expected to come down for a while.