Front month Henry Hub natural gas futures have risen 40% so far in May, but Citigroup's commodities team believes the rally has run out of steam.

The bank recommended a neutral position on natural gas in a report released overnight, but suggested companies short natural gas contracts at the first sign of a rebound in U.S. production.

Henry Hub natural gas futures fell to $1.909/MMBtu on April 26 and hit a fresh 2024 high of $2.788/MMBtu on Tuesday. That surpassed the price target of $2.50/MMBtu the bank set in March. Its analysts believe most of the advance was tied to short covering and that large commodity funds are maintaining neutral positions in the market.

While Citi said it believes natural gas increases have ended for now, they cautioned against upside risks this summer. Record heat could lead to additional price gains and a new Permian pipeline - the Matterhorn Express - is set to begin operations in July. That line will convey natural gas from the Permian Basin to the Katy Hub near Houston.

Citi provided some regional guidance on natural gas values, suggesting that U.S. Northeast numbers below $1.50/MMBtu would lead to production shut-ins.

Output would be shuttered in the Haynesville shale play should prices drop below $1.70/MMBtu, the bank said.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Tom Kloza,; Editing by Jeff Barber,

(END) Dow Jones Newswires

05-22-24 1052ET