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Natural Gas Falls on Huge Supply Build, Sliding LNG Exports

April 16, 2020 at 15:29 by Andrew Moran

Natural gas futures are falling on Thursday after the US government reported an increase in domestic inventories that matched market expectations. The energy commodity is also taking a hit on new data that found liquid natural gas (LNG) exports slumped amid the coronavirus pandemic. Industry observers say prices could test $2 sometime this year on diminishing output levels.

May natural gas futures shed $0.03, or 1.88%, to $1.568 per million British thermal units (btu) at 15:18 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a steep weekly loss of about 10%, adding to its year-to-date decline of more than 28%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas surged by 73 billion cubic feet for the week ending April 10, slightly higher than the median estimate of 71 billion cubic feet. In total, supplies stand at 2.097 trillion, up 876 billion cubic feet from the same time a year ago. They are also 370 billion cubic feet above the five-year average.

A new Refinitiv report found that US natural gas production declined to 92.6 billion cubic feet per day, which is below the all-time daily high of 96.5 billion cubic feet that was recorded at the end of November.

A month into spring and weather conditions have been cooler than normal, particularly in the central and eastern regions of the US. But the latest forecasts suggest a warming pattern in the coming days. Natural gas just endured a warmer-than-normal winter, erasing high demand volumes that were originally anticipated after November’s bout of freezing temperatures and snowstorms.

Following an unusually mild winter, natural gas storage facilities ended the withdrawal season with approximately two trillion cubic feet in stockpiles.

The futures market appears to be bullish on natural gas with January contracts nearing $3 per million btu. Investors are betting on renewed demand as the economy returns to normal and the natural gas market rebalances over the next several months.

In other energy commodities, May West Texas Intermediate (WTI) crude oil futures dipped $0.10, or 0.46%, to $19.78 per barrel. June Brent crude futures picked up $0.14, or 0.51%, to $27.83 per barrel. May gasoline futures rose $0.0228, or 3.21%, to $0.7435 a gallon. May heating oil futures tacked on $0.0378, or 4.14%, to $0.9519 per gallon.

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