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Natural Gas Falls, Records 1% Gain in October

November 1, 2018 at 15:40 by Andrew Moran

Natural gas futures are trading downwards on Thursday after the US government reported a smaller-than-expected weekly increase in domestic inventories. With natural gas prices recently surpassing $3.25, some analysts anticipate the energy commodity to top $5 because of frigid temperatures.

December natural gas futures weakened $0.02, or 0.67%, to $3.24 per million British thermal units (btu). Natural gas prices posted a 1% jump last month, continuing its strong performance in 2018. Year-to-date, natural gas has advanced about 10%.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas climbed by 48 billion cubic feet for the week ending October 26, which is slightly less than the market forecast of 50 billion. In total, US supplies stand at 3.143 trillion cubic feet, down 623 billion cubic feet from the same time a year ago. They are also 638 billion below the five-year average.

There are some investors who believe that natural gas could spike to as high as $5 in the coming months because falling temperatures. Last winter, when subzero temperatures engulfed many parts of the US, natural gas inventories were depleted, and many feel it could happen again, with several forecasts predicting cold snaps in much of the country.

While the US and Russia lead the world in natural gas output, one of the biggest markets, Canada, is expected to face a shortage that could last throughout the winter, which stemmed from the pipeline explosion that rocked Prince George, British Columbia. This is causing domestic industries, local governments, and other entities to seek alternative fuel substitutes.

The US-China trade war is starting to have its impact on the natural gas industry. Earlier this week, it was reported that LNG Limited, an Australian company behind a multi-billion-dollar project to export liquefied natural gas from Louisiana, is delaying its investment because it cannot attract Chinese buyers.

LNG Limited CEO Greg Vesey said in a letter to shareholders:

We made that statement prior to the trade tensions that have manifested over the past months, which have caused headwinds for LNG transactions. We remain hopeful in our ability to bring a final investment decision for Magnolia LNG to the Board of Directors in the first part of 2019.

In other energy commodities, December West Texas Intermediate (WTI) crude oil futures tumbled $0.71, or 1.09%, to $64.60 per barrel. January Brent crude futures shed $0.84, or 1.12%, to $74.20 a barrel. December gasoline futures fell $0.023, or 1.36%, to $1.72 per gallon. December heating oil futures slipped $0.012, or 0.55%, to $2.239 a gallon.

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