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Natural Gas Rises As Hurricane Dorian Offsets Weekly Supply Climb

August 29, 2019 at 18:39 by Andrew Moran

Natural gas futures are rallying on Thursday as the possibility of Hurricane Dorian is outweighing the weekly inventory climb. The energy commodity is gaining on the latest weather system building in the Atlantic, even though experts say that it is not a major threat to production in the Gulf of Mexico. But investors fear that it might signal that the worst of hurricane season may be on the horizon.

October natural gas futures surged $0.07, or 3.15%, to $2.29 per million British thermal units (btu) on Thursday on the New York Mercantile Exchange. Natural gas prices enjoyed their best finish since the end of July, and they are on track for a weekly gain of just under 6%. Year-to-date, natural gas is still down roughly 20%.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas increased by 60 billion cubic feet for the week ending August 23. This is about in line with the median estimate of 57 billion cubic feet. In total, inventories stand at 2.857 trillion cubic feet, up 363 billion cubic feet from the same time a year ago. They are also 100 billion below the five-year average.

While this would typically send natural gas lower, it is the weather event developing in the Atlantic that is lifting prices.

Hurricane Dorian is heading toward the southeastern US and could make landfall in between Florida and Georgia by the Labor Day long weekend. The Sunshine State has already declared a state of emergency on Thursday as experts warn that it is projected to become a Category 4 storm.

Some say that it might not severely impact energy production as previous natural disasters. However, the market is concerned that the worst is yet to come since the peak of the season will not happen until the middle of the month – hurricane season runs from June 1 to November 30.

Overall, traders are keeping an eye out for tropical developments.

Global prices remain at historic lows overseas, thanks to the international supply glut. But there are other factors to consider, such as a decline in demand in Europe and Asia, the US-China trade dispute, and inadequate storage facilities.

In other energy markets, November West Texas Intermediate (WTI) crude oil futures rose $0.51, or 0.91%, to $56.29 per barrel. October Brent crude futures edged up $0.20, or 0.32%, to $60.11 a barrel. October gasoline futures were flat at $1.56 per gallon. October heating oil futures were unchanged at $1.86 a gallon.

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