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Natural Gas Edges Higher as US Supplies Rise Less Than Expected

October 24, 2019 at 16:29 by Andrew Moran

Natural gas futures are posting modest gains on Thursday after the US government reported that a smaller-than-expected increase in domestic inventories. Investors are also keeping an eye on weather forecasts for next month and the potential rise of China as a major natural gas player.

November natural gas futures rose $0.02, or 0.95%, to $2.305 per million British thermal units (btu) at 16:15 GMT on Thursday on the New York Mercantile Exchange. Natural gas has had a rough October, plunging more than 6% and adding to its year-to-date loss of 20%. The energy commodity is on track for a weekly loss of 1%.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas climbed by 87 billion cubic feet for the week ending October 18. This is lower than the market forecast of 92 billion cubic feet. In total, inventories stand at 3.606 trillion cubic feet, up 519 billion cubic feet from the same time a year ago. They are also 28 billion cubic feet above the five-year average.

It has been reported over the last year that China is trying to become a huge player in the global natural gas market. As the country transitions away from coal and into natural gas, which is considered a bridge fuel to renewables, Beijing is looking at ways to produce the energy source. Because Chinese demand is projected to soar 80% within the next 10 years, the central government wants to boost domestic output, introducing a myriad of incentives to drive this initiative.

Beijing established a subsidy program this past summer that would extend new incentives for the production of natural gas. It is scheduled to be in effect until 2023. Also, the government has permitted foreign businesses to operate independently of the nation’s energy sector. Analysts believe that China will eventually curtail environmental regulations to generate synthetic natural gas from coal, which already accounts for 1% to 3% of overall natural gas production.

This comes soon after China launched a new price index for liquefied natural gas (LNG) imports.

Meanwhile, investors are combing through the latest weather data. Forecasters now say that the US will shift “considerably warmer” in the coming weeks, effectively snapping the cold spell. This would potentially reduce the demand for natural gas by the middle of November.

In other energy markets, December West Texas Intermediate (WTI) crude oil futures added $0.23, or 0.41%, to $56.20 per barrel. January Brent crude futures rose $0.32, or 0.52%, to $61.49 a barrel. December gasoline futures shed $0.028, or 1.7%, to $1.62 a gallon. December heating oil futures tacked on $0.017, or 0.87%, to $1.96 per gallon.

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