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Natural Gas Gains on Bullish EIA Supply Report

February 20, 2020 at 15:49 by Andrew Moran

Natural gas futures pared their earlier losses on Thursday after the US government reported a decline in domestic inventories that met market forecasts. Natural gas has had a rebounding week, buoyed by a bullish industry outlook and cold weather forecasts for the remainder of February.

March natural gas futures rose $0.01, or 0.56%, to $1.96 per million British thermal units (btu) at 14:41 GMT on Thursday on the New York Mercantile Exchange.  Natural gas is on track for a big weekly gain of more than 6%, paring its year-to-date loss of around 11%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas declined by 151 billion cubic feet for the week ending February 14. This is pretty much in line with the median estimate of 150 billion cubic feet. In total, stockpiles stand at 2.343 trillion cubic feet, up 613 billion cubic feet from the same time a year ago. They are also 200 billion cubic feet above the five-year average.

Earlier this week, prices recorded their best one-day gain in more than a year as the energy commodity soared 8%. Investors reacted positively to forecasts for freezing temperatures in the west, but the predictions were offset by above-average temperature expectations in the Midwest and Northeast. That said, analysts still believe it will be hard for natural gas to break above the key resistance level of $2.

In industry news, according to a Royal Dutch Shell study, global demand for liquefied natural gas (LNG) surged by 12.5% to 359 million tons last year. Researchers anticipate that LNG demand will double by 2040 to 700 million tons that will help play “a growing role in shaping a lower-carbon energy system.”

The company noted that LNG imports in several emerging markets recorded double-digit gains in 2019. China’s imports jumped by 14%, while Bangladesh, India, and Pakistan reported growth of 19%.

Maarten Wetselaar, integrated gas and new energies director at Shell, said in a statement:

The global LNG market continued to evolve in 2019 with demand increasing for LNG and natural gas in power and non-power sectors. Record supply investments will meet people’s growing need for the most flexible and cleanest-burning fossil fuel.

While we see weak market conditions today due to record new supply coming in, two successive mild winters and the Coronavirus situation, we expect equilibrium to return, driven by a combination of continued demand growth and reduction in new supply coming on-stream until the mid-2020s.

In other energy markets, April West Texas Intermediate (WTI) crude oil futures surged $0.65, or 1.22%, to $54.14 per barrel. May Brent crude futures picked up $0.45, or 0.76%, to $59.55 a barrel. March gasoline futures rose $0.02, or 1.21%, to $1.68 per gallon. March heating oil futures edged up $0.005, or 0.3%, to $1.7073 a gallon.

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