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Natural Gas Extends Rally As Supply Build Comes in Lower Than Market Forecasts

September 24, 2020 at 16:18 by Andrew Moran

Natural gas futures are extending their massive rally on Thursday, driven by the US government reporting a lower-than-expected build in domestic inventories. With the La Nina climate pattern expected to blanket North America with frigid temperatures, this could be the start of a major ascent for the energy commodity.

November natural gas futures rose $0.05, or 1.79%, to $2.844 per million British thermal units (btu) at 16:04 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are coming off a 51% explosion on Wednesday, adding to their year-to-date surge beyond 30%.

According to the US Energy Information Administration (EIA), domestic natural gas stockpiles climbed 66 billion cubic feet in the week ending September 18. The market had anticipated an increase of 86 billion cubic feet. In total, US supplies stand at 3.68 trillion cubic feet, up 504 billion cubic feet from the same time a year ago. They are also 407 billion cubic feet above the five-year average.

In the middle of the trading week, futures contracts found immense support from disruptions from storm-related flooding to liquefied natural gas (LNG) facilities in Texas. There were also reports of strengthening demand – at home and abroad. Refinitiv data discovered that US pipeline exports to Mexico, for example, hit six billion cubic feet in September, up from 5.9 billion cubic feet from August.

In total, US natural gas exports are projected to top 84.4 billion cubic feet per day next week, up from the present 82 billion cubic feet per day.

On Wednesday, the National Hurricane Center reported that flash flooding from Tropical Storm Beta affected parts of key energy-producing areas of Louisiana and Texas. Cameron, Corpus Christi, Freeport, and Sabine Pass export terminals are also in the path of Beta, which has already been downgraded to a post-tropical cyclone, so the damage might not be as intense.

In other energy commodities, December West Texas Intermediate (WTI) crude oil futures edged up by $0.07, or 0.18%, to $40.00 per barrel. December Brent crude futures were unchanged at $42.26 a barrel. October gasoline futures rose $0.0092, or 0.79%, to $1.1674 a barrel. October heating oil futures slipped $0.0018, or 0.16%, to $1.116 per barrel.

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