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Natural Gas Flat Despite Bigger-Than-Expected Drop in US Supplies

February 6, 2020 at 15:55 by Andrew Moran

Natural gas futures are trading flat on Thursday, despite the US government reporting a larger than expected decline in domestic inventories. Natural gas has slumped to its lowest level in more than three years, and analysts are expecting prices to moderate as supply and demand are projected to tighten in the coming weeks. Weather forecasts are also playing a part in the energy commodity’s performance.

March natural gas futures dipped $0.001, or 0.05%, to $1.86 per million British thermal units (btu) at 14:44 GMT on Thursday on the New York Mercantile Exchange. Natural gas has plummeted 15% year-to-date, but it is on track for a weekly gain of at least 1%.

According to the US Energy Information Administration (EIA), domestic stockpiles decreased by 137 billion cubic feet for the week ending January. In total, inventories stand at 2.609 trillion cubic feet, up 615 billion cubic feet from the same time a year ago. They are also 199 billion cubic feet above the five-year average.

Investors are anticipating tighter balances as US producers, who have led the way in the natural gas revolution in recent years, reduce output amid low prices. There are concerns about lower demand, especially in China as the country grapples with the Wuhan coronavirus that has killed more than 500 people and infected about 24,000. Overall, the latest EIA storage figures suggest lingering tightness in the core fundamentals.

Although weather conditions are not dominating the Thursday trade, investors are still keeping an eye on reports. The current forecast calls for warmer-than-average temperatures for most of the US over the next several days. But there could be a push of frigid air over the next ten days that could satisfy prices and ensure natural gas does not flirt with $1.61.

In other energy markets, March West Texas Intermediate (WTI) crude oil futures picked up $0.28, or 0.55%, to $51.03 per barrel. April Brent crude futures were unchanged at $55.28 a barrel. March gasoline futures edged up $0.005, or 0.36%, to $1.49 a gallon. March heating oil futures rose $0.02, or 1.23%, to $1.665 per gallon.

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