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Natural Gas Flat on Smaller-Than-Expected Supply Build

July 16, 2020 at 15:55 by Andrew Moran

Natural gas futures are trading flat on Thursday after the US government reported a smaller-than-expected increase in domestic stockpiles. Investors also combed through a new industry report that assessed the state of the natural gas sector during the summer months. With higher temperatures seemingly priced in the market, what other factors could be driving the energy commodity?

September natural gas futures edged up $0.005, or 0.23%, to $1.783 per million British thermal units (btu) at 15:38 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are on track for a modest weekly gain of 0.7%, lowering their year-to-date losses to around 18%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas increased by 45 billion cubic feet for the week ending July 10. This is smaller than the median estimate of 50 billion. In total, US supplies stand at 3.178 trillion cubic feet, up 663 billion cubic feet from the same time a year ago. They are also 436 billion cubic feet above the five-year average.

Fitch Ratings published a natural gas report that examined production, post-coronavirus demand, and high storage levels. Analysts estimated that US production had moderated this season due to a COVID-19-linked curtailment as well-hedged producers locked in higher prices and made only conservative reductions to output levels. Overall, US production is down 1.4 billion cubic feet per day.

Experts are forecasting that output will resume to normal levels in the coming months, pushing storage capacity to five-year highs. They do project that prices could find near-term support by diminishing crude oil demand, which could force oil and gas firms to increase capital investments over the medium-term.

In other industry news, new data found that the value of its gold exports surpassed the nation’s revenues from its natural gas shipments. According to the Russia’s customs data, Russian gold exports topped $3.58 billion in April and May, while its natural gas exports were worth $2.4 billion.

In other energy commodities, August West Texas Intermediate (WTI) crude futures tumbled $0.26, or 0.63%, to $40.94 per barrel. September Brent crude futures shed $0.22, or 0.5%, to $43.59 a barrel. August gasoline futures dropped $0.0245, or 1.94%, to $1.24 per gallon. August heating oil futures slid $0.0127, or 1.02%, to $1.2321 per gallon.

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