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Natural Gas Plunges 6% on Lower-Than-Expected Drop in US Supplies

February 27, 2020 at 15:50 by Andrew Moran

Natural gas futures are cratering on Thursday after the US government reported a smaller-than-expected decline in domestic inventories. This comes after a new forecast suggested a double-digit increase in natural storage levels, as well as a jump in stockpiles during the refill season.

April natural gas futures plummeted $0.113, or 6.15%, to $1.724 per million British thermal units (btu) at 14:45 GMT on Thursday on the New York Mercantile Exchange. The energy commodity is poised for a weekly crash of 10%, lifting its year-to-date loss to 21%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas slipped by 143 billion cubic feet for the week ending February 21. The market had expected a drop of 158 billion cubic feet. In total, inventories stand at 2.2 trillion cubic feet, up 637 billion cubic feet from the same time a year ago. They are also 179 billion cubic feet above the five-year average.

On Tuesday, the EIA released its February Short-Term Energy Outlook (STEO) and it projects that natural gas supplies will finish the 2019–2020 winter heating season at 1.935 billion cubic feet. This is 12% above the five-year average. The US government blamed the increase on mild winter temperatures and rising domestic output.

The EIA now forecasts a boost in national storage levels during the refill season, which begins on April 1 and ends on October 31.

While the weather models do show cooler trends in the coming days, analysts say that this season has often led to warmer-trending forecasts following cold periods.

In other energy markets, April West Texas Intermediate (WTI) crude oil futures plunged $2.57%, or 5.27%, to $46.16 a barrel. May Brent crude futures tumbled $2.19, or 4.15%, to $50.62 per barrel. March gasoline futures fell $0.07, or 4.6%, to $1.4925 a gallon. March heating oil futures declined $0.05, or 3.6%, to $1.44 per gallon.

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