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Natural Gas Plunges As Supply Jump Matches Market Forecasts

October 11, 2018 at 19:08 by Andrew Moran

Natural gas futures are plunging as much as 2% on Thursday after the US government reported that domestic inventories rose by the same level as what the market had projected. Despite the steep decline, natural gas prices have rallied nearly 1% over the last five trading sessions, contributing to their impressive 2018 performance. 

November natural gas futures tumbled $0.06, or 1.86%, to $3.22 per million British thermal units (btu) at 18:40 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are trading at their best levels in about nine months and are on track for another weekly jump. Over the last month, the energy commodity has surged more than 15%. 

According to the US Energy Information Administration (EIA), domestic supplies of natural gas climbed by 90 billion cubic feet for the week ending October 5, matching market expectations. In total, stockpiles stand at 2.956 trillion cubic feet, which is down 627 billion cubic feet from the same time a year ago. They are also 607 billion below the five-year average. 

Last year, US households burned through national inventories at a record pace as much of the nation was engulfed in a bitter cold. If the recent weather outlook reports are to be believed, then investors can brace for a similar season, which means supplies will need to be kept up with demand. 

In other energy markets, November gasoline futures plummeted $0.09, or 4.44%, to $1.93 per gallon. November heating oil futures slipped $0.065, or 2.68%, to $2.33 a gallon. 

On Wednesday, the EIA reported that US crude supplies edged up six million barrels for the week ending October 5. Gasoline inventories increased by one million barrels, while distillate stockpiles fell 2.7 million barrels. Domestic crude oil output held steady above 11 million barrels per day (bpd). 

December West Texas Intermediate (WTI) crude oil futures slid $2.44, or 3.29%, to $70.63 a barrel. December Brent crude futures dropped $3.03, or 3.65%, to $80.06 per barrel. 

Natural gas prices were supported by a weaker US dollar as the greenback dipped 0.48% to 95.01. A lower buck is good for dollar-pegged commodities because it makes it cheaper for foreign investors to purchase. 

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