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Natural Gas Slides After Larger-Than-Expected Jump in US Supplies

August 1, 2019 at 18:28 by Andrew Moran

Natural gas futures are trading lower toward the end of the trading week after the US government reported a larger-than-expected increase in domestic inventories. Amid multi-year lows driven by ample supplies, the market has gone bearish on the energy commodity.

September natural gas futures tumbled $0.02, or 0.90%, to $2.213 per million British thermal units (btu) at 18:11 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices slumped 14% in the second quarter, bringing their year-to-date (YTD) losses to just under 23%.

Prices are now at their lowest levels since February 2016.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas surged by 65 billion cubic feet for the week ending July 26. This is higher than the market forecast of 52 billion cubic feet. In total, stockpiles stand at 2.634 trillion cubic feet, up 334 billion cubic feet from the same time a year ago. But this is 123 billion cubic feet below the five-year average.

Cooler temperatures were blamed for the reduction in consumer demand.

Despite topping $2.30 earlier this week, investors are turning sour on natural gas. According to the US Commodity Futures Trading Commission (CFTC), hedge funds and money managers have increased their net bearish positions to their highest levels since November 2015 in the week ending July 23.

Although a heatwave struck the eastern United States to kick off July, the demand was not enough to outweigh domestic supplies. Thanks to the shale revolution continuing in the US, output levels remain at historic highs. But the supply glut could deteriorate in the next couple of years as more countries transition into the energy source.

The International Energy Agency (IEA) recently stated that global consumption advanced by just under 5% last year.

In other energy markets, September West Texas Intermediate (WTI) crude oil futures plummeted $4.39, or 7.65%, to $54.25 per barrel. October Brent crude futures plunged $4.23, or 6.5%, to $60.89 a barrel. September gasoline futures shed $0.10, or 5.5%, to $1.75 per barrel. October heating oil futures fell $0.11, or 5.7%, to $1.85 a barrel.

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