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Natural Gas Pauses After Bigger-Than-Expected Weekly Supply Jump

November 8, 2018 at 18:53 by Andrew Moran

Natural gas futures are sliding on Thursday after the US government reported a larger-than-expected increase in domestic inventories. The energy commodity is taking a breather after surging nearly 10% over the last week on bullish weather forecasts.

December natural gas futures tumbled $0.02, or 0.54%, to $3.53 per million British thermal units (btu) at 17:26 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices have been roaring in 2018, climbing 20% year-to-date.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas soared by 65 billion cubic feet for the week ending November 2, higher than market expectations of 55 billion cubic feet. In total, US stockpiles stand at 3.208 trillion cubic feet, down 580 billion cubic feet from the same time a year ago. They are also 621 billion below the five-year average.

Investors have been bullish on natural gas in recent trading sessions, primarily because many parts of the US have experienced colder-than-normal temperatures. Moreover, a lot of short-term forecasts are pointing to cold bursts across the Midwest, the Northeast, and the South. Overall, most winter projections show much of the country will be engulfed in frigid temperatures, similar to last year.

Typically, when cold bursts blast through the nation, inventories take a nosedive. But it is not just households that are consuming more of the energy supply. A greater number of power plants and industrial projects are utilizing natural gas, and there are higher exports of liquefied natural gas (LNG)

Because of these trends, many analysts are anticipating natural gas prices to top $5 and potential spike to $6 per btu. Raymond James and Associates has already raised its pricing outlook for 2019 and beyond.

In other energy markets, December gasoline futures were flat at $1.65 per gallon and December heating oil futures plummeted $0.06, or 2.83%, to $2.17 a gallon.

On Wednesday, the EIA reported that US crude oil inventories jumped for the seventh consecutive week by 5.8 million barrels. Gasoline supplies advanced 1.9 million barrels, while distillate stockpiles fell by 3.5 million barrels.

December West Texas Intermediate (WTI) crude futures slid $0.68, or 1.1%, to $60.99 a barrel. January Brent crude futures shed $0.95, or 1.3%, to $71.13 per barrel.

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