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Natural Gas Rises 1% As Supply Build Matches Market Forecasts

June 11, 2020 at 16:08 by Andrew Moran

Natural gas futures are rising more than 1% on Thursday after the US government reported an increase in supplies that matched market forecasts. Despite the energy commodity’s rebound over the last month, it is still down double digits so far this year. With global demand cratering, prices could sink further this year.

July natural gas futures rose $0.023, or 1.25%, to $1.802 per million British thermal units (btu) at 15:54 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a 1% loss, bringing its year-to-date loss to just below 18%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas climbed by 93 billion cubic feet for the week ending June 5. This is roughly in line with the median estimate of 95 billion. In total, stockpiles stand at 2.807 trillion cubic feet, up 748 billion cubic feet from the same time a year ago. They are also 421 billion cubic feet above the five-year average.

On Wednesday, the International Energy Agency (IEA) published its Gas 2020 report, forecasting that natural gas consumption is set to collapse 4% this year. This is about double the drop after the 2008 financial crisis. The IEA also says that global demand for the so-called bridge fuel would increase 1.5% annually in 2025, lower than the previous projection of 1.8%.

Fatih Birol, the IEA’s executive director, said in a statement:

The record decline this year represents a dramatic change of circumstances for an industry that had become used to strong increases in demand. The Covid-19 crisis will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties.

But not everyone agrees with the IEA’s assessment.

The world’s top liquefied natural gas (LNG) trader recently told Bloomberg that he is expecting a major comeback in the global market, returning to levels before the coronavirus pandemic. Shell CEO Ben van Beurden thinks the industry will return to balance next year because of sluggish supply growth.

We will obviously flex our investment program to be aligned with where we believe the sector will go, but the profitability of the business and the outlook of this business is going to be as good as what you saw before the pandemic.

In other energy commodities, July West Texas Intermediate (WTI) crude oil futures plummeted $3.26, or 8.23%, to $36.34 per barrel. August Brent crude futures slumped $2.93, or 7.02%, to $38.81 a barrel. July gasoline futures cratered $0.0936, or 7.7%, to $1.1167 a gallon. July heating oil futures shed $0.0868, or 7.43%, to $1.0858 per gallon.

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