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Natural Gas Seesaws Amid US Supply Build

May 7, 2020 at 15:11 by Andrew Moran

Natural gas futures are seesawing on Thursday after the US government reported a build in domestic stockpiles of natural gas. Despite production levels gradually coming down, the storage increase was slightly higher than the median estimate. It has been an up-and-down year for the energy commodity.

June natural gas futures dipped $0.002, or 0.1%, to $1.942 per million British thermal units (btu) at 15:07 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices had traded 2% higher before the report, and then 2% report after the report went public. Natural gas is on track for a weekly loss of about 1%, adding to its year-to-date decline of 13%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas surged by 109 billion cubic feet for the week ending May. The market had forecast a rise of 105 billion cubic feet. In total, supplies stand at 2.319 trillion cubic feet, up 796 billion cubic feet from the same time a year ago. They are also 395 billion cubic feet above the five-year average.

The International Energy Agency (IEA) recently forecast that global natural gas demand could plunge 6% this year, marking the steepest decline in 70 years. The report blamed the crash in demand due to the coronavirus pandemic that has forced hundreds of millions of people to live under some type of lockdown. This officially ends the decade of uninterrupted growth, and officials say it is too premature to provide a long-term outlook.

IEA Executive Director Fatih Birol said in a statement:

This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil, and gas.

It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before.

Meanwhile, investors are paying attention to cooler weather patterns that are sweeping across the northern part of the US and some pockets of the west. The below-average temperatures could slightly lift heading demand over the next ten days.

In other energy commodities, June West Texas Intermediate (WTI) crude oil futures added $2.09, or 8.63%, to $26.06 per barrel. June Brent crude futures picked up $1.68, or 5.65%, to $31.40 a barrel. June gasoline futures surged $0.081, or 9.32%, to $0.9583 per gallon. June heating oil futures advanced $0.0535, or 6.49%, to $0.8775 a gallon.

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