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Natural Gas Falls 3%, Poised for Huge Weekly Loss

May 29, 2020 at 17:29 by Andrew Moran

Natural gas futures fell as much as 3% at the end of the trading week as the US government reported a larger-than-expected increase in the weekly supply build. Prices are on track for a steep weekly loss, despite new data showing growing air-conditioning consumption as temperatures begin to rise. Could the energy commodity rebound next month?

July natural gas futures tumbled $0.044, or 2.41%, to $1.783 per million British thermal units (btu) at 17:16 GMT on Friday on the New York Mercantile Exchange. Natural gas prices will settle the week down just under 6%, adding to their year-to-date losses of more than 18%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas rose by 109 billion cubic feet for the week ending May 22. The market had anticipated an increase of 90 billion cubic feet. In total, US stockpiles stand at 2.612 trillion cubic feet, up 778 billion cubic feet from the same time a year ago. They are also 423 billion cubic feet above the five-year average.

The surprise jump in domestic supplies outweighed the bullish trends for the natural gas market.

Refinitiv, a financial data firm, reported that average natural gas output levels declined to 89.2 billion cubic feet per day (bcfd) in May. This is down from last month’s 92.9 bcfd, an eight-month low. The all-time monthly high was in November when production topped 95.4 bcfd.

With weather forecasts pointing to warmer temperatures across North America, the company projects that demand would jump to 78.5 bcfd this week. Over the next two weeks, it believes demand will reach 82.4 bcfd. One of the chief contributors to the swelling demand is the increase in air-conditioning, which has been steadily going up in recent days amid hotter weather.

Meanwhile, US liquid natural gas (LNG) exports dipped to an average of 6.5 bcfd in May, down from a four-month low of 8.1 bcfd in April. The industry suffered a huge number of cancelations of cargoes from foreign importers.

In other energy commodities, July West Texas Intermediate (WTI) crude oil futures slipped $0.12, or 0.36%, to $33.59 per barrel. August Brent crude futures were flat at $35.96 a barrel. July gasoline futures shed $0.005, or 0.49%, to $1.0221 a gallon. July heating oil futures picked up $0.0195, or 2.00%, to $0.9945 per gallon.

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