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Natural Gas Rises As Supply Build Beats Market Forecasts

January 16, 2020 at 17:10 by Andrew Moran

Natural gas futures are rising on Thursday after the US government reported a better-than-expected increase in domestic inventories of the energy commodity. But natural gas remains bearish as average or above-average seasonal temperatures impact demand volumes across the US. Is there relief in sight?

February natural gas futures rose $0.03, or 1.5%, to $2.15 per million British thermal units (btu) at 15:57 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are poised for a weekly decline of just under 1%, adding to its 1.5% loss so far this year.

According to the US Energy Information Administration (EIA), domestic stockpiles tumbled by 109 billion cubic feet for the week ending January 10. The market had penciled in a drop of 92 billion cubic feet. In total, inventories stand at 3.039 trillion cubic feet, up 494 billion cubic feet from the same time a year ago. They are also 149 billion cubic feet above the five-year average.

Over the last month, natural gas prices have fallen more than 6%. What started as a bullish winter outlook in November has metastasized into hopes that Old Man Winter will start blanketing North America with heavy volumes of snow and subzero temperatures.

NatGasWeather is forecasting a shift to colder temperatures in the final week of January. The outlet is discovering a much better pattern for the natural gas market beginning next week, a trend that could finally lift demand. At this point, however, it is unclear if it will be enough to raise prices above the key $2.20 threshold next month.

Some analysts think that the selloff on warmer weather is an overreaction. HFIR Energy Research writes:

The market appears to be over-discounting the incoming weather trend as if winter is already over. That is clearly not the case, and while the recent colder than normal trend has had no staying power, the latest forecast does show a significant shift.

In other energy markets, February West Texas Intermediate (WTI) crude oil futures rallied $0.96, or 1.66%, to $58.77 per barrel. March Brent crude futures picked up $0.90, or 1.41%, to $64.90 a barrel. February gasoline futures tacked on $0.0155, or 0.95%, to $1.652 per gallon. February heating oil futures dipped $0.01, or 0.5%, to $1.87 a gallon.

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