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Natural Gas Bucks Broader Market Slump Despite Supply Build

September 3, 2020 at 16:09 by Andrew Moran

Natural gas futures are bucking the broader market slump on Thursday after the US government reported a build in weekly inventories. Natural gas prices have had a rough start to September following an enormous August that saw the energy commodity hit a ten-month high.

October natural gas futures advanced $0.035, or 1.33%, to $2.519 per million British thermal units (btu) at 15:54 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a weekly loss of nearly 7%, trimming its year-to-date gain to a little more than 15%.

According to the US Energy Information Administration (EIA), domestic stockpiles increased by 35 billion cubic feet for the week ending August 28. The market had penciled a build of 34 billion cubic feet. This was the lowest supply jump in five weeks. In total, supplies stand at 3.455 trillion cubic feet, up 538 billion cubic feet from the same time a year ago. They are also 407 billion cubic feet above the five-year average.

Natural gas has been on a tear since the EIA forecast that the so-called bridge fuel would experience “strong demand from natural gas-fired power generation.” The EIA projected that natural gas consumption for power generation surged to an all-time high of 43.6 billion cubic feet per day in July.

Production has declined in response to market conditions, with drilling, completion activities, and active natural gas drilling rigs falling. The EIA estimated that output fell to 86.8 billion cubic feet per day in July, down 9.5 billion from the peak in November 2019. That said, despite prices climbing to multi-month highs, company shares have failed to respond.

The consensus, however, is that the rally will be short-lived unless an unexpected heatwave and supply disruption happens.

In other energy commodities, December West Texas Intermediate (WTI) crude oil futures fell $0.71, or 1.71%, to $40.80 per barrel. November Brent crude futures shed $0.85, or 1.91%, to $43.58 a barrel. October gasoline futures dipped $0.0053, or 0.43%, to $1.1968 per gallon. October heating oil futures slipped $0.0313, or 2.62%, to $1.1574 per gallon.

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