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Natural Gas Rallies on Tepid Supply Build, Cold Weather

November 14, 2019 at 16:43 by Andrew Moran

Natural gas futures are rallying on Thursday after the US government reported a smaller than expected build in domestic weekly inventories. Natural gas prices are also trading higher on the early winter weather blanketing many parts of the US and Canada, forcing households to turn up the heat to stay warm.

December natural gas futures rose $0.04, or 1.47%, to $2.64 per million British thermal units (btu) at 15:25 GMT on Thursday on the New York Mercantile Exchange. The energy commodity is on track for a weekly loss of about 5%, but it has soared nearly 20% since August. Year-to-date, natural gas is down 8%.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas climbed by three billion cubic feet, which falls short of the market forecast of seven billion. In total, inventories stand at 3.732 trillion cubic feet, up 491 billion cubic feet from the same time a year ago. They are also two billion cubic feet above the five-year average.

In a separate report on Wednesday, the EIA revised upward its forecast for natural gas prices this year. The EIA projects that natural gas prices will average $2.61 per btu, up 1.6% from its previous forecast. However, it did modify its prediction for next year by 1.3% to $2.48 per btu.

The reason for the drop in prices in 2020 is because of the expected increase in natural gas capacity. This year alone, the US has witnessed an additional 17 billion cubic feet per day jump in pipeline capacity. The figure is likely to balloon in 2020 as 46 natural gas pipeline projects will come online by the end of 2019.

Meanwhile, natural gas is finding support from the harsh winter weather that has already impacted much of North America. Even in the southern US, the region is expected to experience record cold temperatures. The arctic blast is expected to linger for the remainder of November, which is good news for natural gas because it will boost demand and eat away at US stockpiles.

In other energy markets, December West Texas Intermediate (WTI) crude oil futures were flat at $57.12 a barrel. January Brent crude futures rose $0.17, or 0.27%, to $62.56 a barrel. December gasoline futures fell $0.0065, or 0.4%, to $1.6305 per gallon. December heating oil futures tacked on $0.013, or 0.68%, to $1.92 a gallon.

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