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Natural Gas Crashes on Larger-Than-Expected Build in Supplies

September 19, 2019 at 15:44 by Andrew Moran

Natural gas futures are cratering on Thursday after the US government reported a larger-than-expected surge in domestic inventories. This segment of the energy sector is also coming under attack by local governments that are restricting consumption and additional supplies from coming online. Is its future in peril?

October natural gas futures tumbled $0.085, or 3.25%, to $2.55 per million British thermal units (btu) at 15:28 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices have erased all their gains this week, though they are still up more than 15% since the end of June. Year-to-date, however, natural gas is down 11%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas soared by 84 billion cubic feet for the week ending September. The market had penciled in an increase of 76 billion cubic feet. In total, US stockpiles stand at 3.103 trillion cubic feet, up 393 billion cubic feet from the same time a year ago. They are also 75 billion below the five-year average.

Despite the rest of the world transitioning to natural gas, there are many US jurisdictions that are declaring war on the energy source, which could harm the nation’s shift away from crude oil.

San Jose recently became the largest city in the country to prohibit new natural gas lines. This move would affect heating systems in homes and large buildings. San Jose follows the footsteps of other California cities to try to curb natural gas consumption, prompting Los Angeles and Palo Alto to consider a similar policy mechanism in the coming months.

While Seattle has been mulling over limits on the so-called bridge fuel, lawmakers have been slowing down the legislative push a bit.

When analysts have suggested that natural gas could be gone in 15 years, they were not kidding. It might not be a supply and demand issue but rather a political decision.

In other energy markets, October West Texas Intermediate (WTI) crude oil futures climbed $0.22, or 0.38%, to $58.33 a barrel. November Brent crude futures advanced $0.73, or 1.14%, to $64.32 per barrel. October gasoline future rose $0.037, or 2.24%, to $1.6948 a gallon. October heating oil futures edged up $0.023, or 1.2%, to $1.99 per gallon.

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