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Natural Gas Jumps 3% on Larger US Supply Drop

March 19, 2020 at 15:32 by Andrew Moran

Natural gas futures are rebounding on Thursday after the US government reported a bigger than expected drop in domestic inventories. Despite an initial surge in prices amid the Saudi Arabia-Russia crude oil price war, natural gas has slumped to multi-year lows in the last ten days.

April natural gas futures rose $0.045, or 2.93%, to $1.651 per million British thermal units (btu) at 15:24 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a weekly loss of about 11%, adding to its year-to-date decline of 25%.

According to the US Energy Information Administration (EIA), domestic stockpiles decreased by nine billion cubic feet for the week ending March 15. The market had anticipated a decline of eight billion cubic feet. In total, supplies stand at 2.034 trillion cubic feet, up 878 billion cubic feet from the same time a year ago. They are also 281 billion cubic feet above the five-year average.

Before the Covid-19 global pandemic, the fundamentals for natural gas looked to be slightly improving. However, with the virus outbreak impacting the global economy, the energy commodity has been disrupted due to sliding demand. Plus, oil prices have crashed, making them more attractive to countries seeking to weather the economic storm clouds.

With the change in seasons, it is highly unlikely that weather will play a significant factor in natural gas trends. Although some weather forecasts do predict a cold start to spring, it might not be enough to reverse its downward trend. Some experts warn that quarantine measures worldwide may lead to a demand loss topping one trillion cubic feet.

Considering all these factors, US producers will likely curtail output and operations. As a result, America’s energy revolution could hit the pause button, temporarily removing its crown as an energy titan.

In other energy markets, April West Texas Intermediate (WTI) crude oil futures tacked on $3.52, or 16.9%, to $24.35 per barrel. May Brent crude futures picked up $1.77, or 7.07%, to $26.64 a barrel. April gasoline futures rose $0.01, or 1.87%, to $0.6484 per gallon. April heating oil futures advanced $0.026, or 2.74%, to $0.98 a gallon.

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