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Natural Gas Pares Gains on Weekly Supply Build, Moderate Weather

August 13, 2020 at 14:55 by Andrew Moran

Natural gas futures are paring their gains on Thursday after the US government reported a slightly bigger-than-expected increase in domestic inventories. The so-called bridge fuel had rallied as much as 3% before the release of the report, but prices have fallen on US supplies and weather forecasts.

September natural gas futures picked up $0.012, or 0.51%, to $2.163 per million British thermal units (btu) at 14:48 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are on track for a weekly slide of nearly 2%, lowering their year-to-date losses to 0.78%.

According to the US Energy Information Administration (EIA), domestic natural gas inventories surged by 58 billion cubic feet in the week ending August 7. This roughly matches the market expectation of a 57-billion boost. In total, US stockpiles stand at 3.332 billion cubic feet, up 608 billion cubic feet from the same time a year ago. They are also 443 billion cubic feet above the five-year average.

The weekly supply data comes soon after the EIA released its Short-Term Energy Outlook (STEO) report. It reported that natural gas output and demand would slide in 2020 and 2021 from their record highs last year. According to the outlook, projected dry gas production will decrease to 88.65 billion cubic feet per day this year and 84.02 billion cubic feet a day next year. This would be down from the record high of 92.21 billion cubic feet per day last year.

Officials also predicted that natural gas consumption would decline to 82.42 billion cubic feet per day in 2020 and 78.71 billion cubic feet per day next year. Last year, consumption fell just short of 85 billion cubic feet per day.

Overall, this would be the first annual decline in consumption in three years, and the first time that demand has decreased for two straight years in more than a decade.

Investors appear to be bullish on the energy commodity as money managers and hedge funds slashed their short positions in futures and options. In the week ending August 4, net short positions declined by 45,000 contracts, and net long positions surged 10,000 contracts.

Weather is also playing a factor in the natural gas movement in recent sessions. Last week, natural gas prices popped more than 30 cents on forecasts showing hot temperatures by the middle of August in most of the US. But the latest models suggest the weather will likely moderate, particularly in the Midwest.

In other energy commodities, September West Texas Intermediate (WTI) crude oil futures shed $0.13, or 0.3%, to $42.54 per barrel. October Brent crude futures dropped $0.20, or 0.44%, to $45.23 a barrel. September gasoline futures were flat at $1.2406 per gallon. September heating oil futures tumbled $0.0125, or 0.99%, to $1.2447 a gallon.

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