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Natural Gas Rises on Bigger Supply Build Decline, Colder Temperatures

January 23, 2020 at 16:37 by Andrew Moran

Natural gas futures are rising on Thursday after the US government reported a larger than expected decline in domestic inventories. Natural gas prices are also enjoying a boost on forecasts for colder temperatures in February as the modest weather has sent the energy commodity below the $2 mark for the first time since February 2016. Has the market bottomed out?

February natural gas futures picked up $0.035, or 1.88%, to $1.94 per million British thermal units (btu) at 15:24 GMT on Thursday on the New York Mercantile Exchange. The natural gas market has been battered this month, shedding more than 11% so far in January.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas decreased by 92 billion cubic feet for the week ending January 17. The market had penciled in a drop of 88 billion cubic feet. In total, inventories stand at 2.947 trillion cubic feet, up 554 billion cubic feet from the same time a year ago. They are also 251 billion cubic feet above the five-year average.

This year’s winter has not been nearly as bad as initially expected before the start of the season. November was full of freezing temperatures and snow, but since then it has been relatively calm. However, according to NatGasWeather data, there could be “more impressive cold air” in the northern US at the beginning of February. If true, then it could limit the recent selling and downward trend in prices.

For now, the consensus is that the natural gas boom might be on its last legs as producers could curtail operations amid lower prices. However, Larry Berman, writing for BNN Bloomberg, believes that this could be a great opportunity for long-term investors, which could be relevant advice for those who missed out on the last meteoric surge.

In other energy markets, February West Texas Intermediate (WTI) crude oil futures fell $1.53, or 2.7%, to $55.21 per barrel. March Brent crude futures plummeted $1.54, or 2.44%, to $61.67 a barrel. February gasoline futures slipped $0.025, or 1.6%, to $1.55 a gallon. February heating oil futures dropped $0.032, or 1.78%, to $1.7725 per gallon.

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