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Natural Gas Plunges as US Supplies Fall Short of Estimates

March 12, 2020 at 17:39 by Andrew Moran

Natural gas futures are joining the rest of the market plunge on Thursday after the US government reported a smaller-than-expected decline in domestic inventories. Despite trading higher this week, the energy commodity fell as much as 5% toward the end of the turbulent trading week. Can natural gas outperform crude oil amid the upcoming Saudi Arabia-Russia price conflict?

April natural gas futures tumbled $0.025, or 1.42%, to $1.85 per million British thermal units (btu) at 17:27 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are up about 5% this week, paring their year-to-date losses of roughly 15%.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas slipped by 48 billion cubic feet for the week ending March 6. The market had penciled in a decline of 55 billion cubic feet. In total, national supplies stand at 2.043 trillion cubic feet, up 796 billion cubic feet from the same time a year ago. They are also 227 billion cubic feet above the five-year average.

It looked like natural gas would continue to rally as US shale producers are anticipated to reduce their capital expenditures and curtail output, which would tighten the global market. With the crisis developing in the crude industry and more certainty in the natural gas industry, many thought investors would pour into the energy commodity for the medium-term. A wide variety of negative effects seem to have limited its surge.

In addition to a huge short position and traders covering their shorts, there are impacts from the coronavirus outbreak, a disappointing winter, and bulls taking care of their margins from the overall equities crash.

In other energy markets, April West Texas Intermediate (WTI) crude futures tumbled $1.67, or 4.97%, to $31.34 per barrel. May Brent crude futures fell $2.55, or 7.12%, to $33.24 a barrel. April gasoline futures shed $0.20, or 17.83%, to $0.9123 a gallon. April heating oil futures slumped $0.10, or 8.05%, to $1.138 per gallon.

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