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Natural Gas Joins Broader Market Drop As Supply Drop Matches Estimates

July 30, 2020 at 14:53 by Andrew Moran

Natural gas futures are slumping on Thursday after the US government reported that domestic inventories fell in the last week. The decline in natural gas prices toward the end of the trading week came as the energy sector witnessed an ocean of red ink. Is this the start of a market correction, or are investors taking profits?

September natural gas futures tumbled $0.056, or 2.85%, to $1.875 per million British thermal units (btu) at 14:44 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a weekly gain of more than 5%, but it is still down 14% year-to-date.

According to the US Energy Information Administration (EIA), domestic natural gas inventories increased by 26 billion cubic feet in the week ending July 24. This is in line with the median estimate of 26 billion cubic feet. In total, US stockpiles stand at 3.241 trillion cubic feet, up 626 billion cubic feet from the same time a year ago. They are also 429 billion cubic feet above the five-year average.

In industry news, President Donald Trump announced on Wednesday that export approvals for liquified natural gas (LNG) would be extended to 2050 as he signed four permits for pipeline and rail transport of oil and gas to permit the transport of US-produced oil to Mexico. The previous policy had been for 20 years.

The president had already confirmed he would extend LNG export terms, but the administration made it official.

He said in a statement:

The United States is now the No. 1 producer of oil and natural gas on the face of the earth. To ensure we maintain this dominant position … my administration is announcing today that export authorizations for American liquefied natural gas can now be extended through the year 2050.

I will sign four critical permits granting approval to vital pipeline and railway infrastructure on our nation’s border. This will include two permits allowing the export of Texas crude to Mexico, a giant victory for the workers of this state.

New Genscape data finds that energy exports to Mexico remain robust, with the US shipping nearly 6.4 billion cubic feet per day of natural gas from July 20 to 24. This is the strongest one-week period for US-Mexico energy trade in years.

On the weather front, natural gas prices may not get a bump at the start of August as forecasts suggest a milder outlook for temperatures over the next ten days. But the US should return to soaring temperatures by the second week of August.

In other energy commodities, September West Texas Intermediate (WTI) crude oil futures plummeted $1.99, or 4.82%, to $39.28 per barrel. October Brent crude futures dropped $1.78, or 4.04%, to $42.31 a barrel. September gasoline futures fell $0.0596, or 4.91%, to $1.1542 per gallon. September heating oil futures declined $0.0651, or 5.16%, to $1.1959 per gallon.

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