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Natural Gas Rises on Smaller Than Usual Build in US Stockpiles

July 25, 2019 at 15:34 by Andrew Moran

Natural gas futures are recording modest gains on Thursday after the US government reported a smaller than usual increase in domestic storage levels. But this trend was offset by a recent forecast that suggested the global supply glut will linger into the 2020s. This is bad news for an energy commodity that has shed 23% so far this year.

September natural gas futures tacked on $0.015, or 0.72%, to $2.217 per million British thermal units (btu) at 15:12 GMT on Thursday on the New York Mercantile Exchange. It is on track for a weekly loss of about 3%.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas rose 36 billion cubic feet for the week ending July 19. This is in line with the median estimate of 35 billion cubic feet. In total, US inventories stand at 2.533 trillion cubic feet, up 291 billion cubic feet from the same time a year ago. They are also 143 billion below the five-year average, which has been the trend since September 2017.

Investors were interested in a report from the Royal Bank of Canada that the international supply glut will continue into the next decade, driven primarily by the immense demand from China. Beijing is anticipated to become the world’s larger liquid natural gas (LNG) importer within the next five years, which would come at around the same time as the US turns into the biggest exporter.

We see the market as clearly oversupplied in 2019 and more moderately oversupplied in 2020, with really only China able to re-balance the market through continued demand growth.

If RBC is correct, then that would suggest prices will not improve anytime soon.

Meanwhile, after there were reports that “natural gas is the new coal,” the International Energy Agency (IEA) disputed these findings. In a new 110-page report, IEA researchers concluded that “gas is nearly always better than coal on a lifecycle basis.

Our detailed assessment of today’s lifecycle emissions of gas and coal supply finds that switching to natural gas yields significant emissions reductions in nearly all cases.

In mature markets like the United States and European Union, coal-to-gas switching is a compelling near-term option for reducing emissions, given existing infrastructure and spare capacity.

The US, which exited from the Paris Accord a couple of years ago, has seen its greenhouse gas emissions plummet to their lowest levels in 30 years, mainly because of natural gas.

In other energy markets, September West Texas Intermediate (WTI) crude oil futures added $0.68, or 1.22%, to $56.56 per barrel. October Brent crude futures edged up $0.72, or 1.14%, to $63.89 a barrel. August gasoline futures surged $0.03, or 1.65%, to $1.83 per gallon. August heating oil futures rose $0.01, or 0.55%, to $1.92 a gallon.

If you have any questions and comments on commodities today, use the form below to reply.

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