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Natural Gas Slides on Supply Build, Still Poised for a Weekly Gain

April 23, 2020 at 14:47 by Andrew Moran

Natural gas futures are slumping on Thursday after the US government reported a larger-than-expected increase in domestic inventories of the energy commodity. Despite the modest decline, prices are still poised for a huge double-digit gain at the end of the trading week.

June natural gas futures tumbled $0.025, or 1.22%, to $2.028 per million British thermal units (btu) at 14:42 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a weekly surge of around 20%, paring its year-to-date to below 7%.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas rose 43 billion cubic feet for the week ending April 17, coming in higher than the market forecast of 39 billion cubic feet. In total, inventories stand at 2.14 trillion cubic feet, up 827 billion cubic feet from the same time a year ago. They are also 364 billion cubic feet above the five-year average.

The EIA also reported that North Dakota flared 19% of its gross 2019 production. When natural gas is not captured, it is flared, which happens when it is burned at the wellhead of the production location.

Natural gas has been on a roller coaster ride this year, joining the turmoil in the broader energy market. The so-called bridge fuel is beginning to reduce its global supply deficit as producers start to reduce output levels. In recent weeks, US oil and gas firms have been increasing their shut-in announcements, and industry observers say more is to come, especially with the highly volatile movement in prices.

On the demand side, analysts say it appears to have bottomed out, at least from an industrial standpoint. Unlike crude oil, the coronavirus pandemic has not collapsed natural gas demand as much as many had initially anticipated since power needs are serving as the main factor in the demand jump.

In other energy markets, June West Texas Intermediate (WTI) crude oil futures surged $3.86, or 28.01%, to $17.64 per barrel. June Brent crude futures added $2.10, or 10.31%, to $22.49 a barrel. June gasoline futures tacked on $0.083, or 12.07%, to $0.7699 per gallon. June heating oil futures picked up $0.0681, or 8.69%, to $0.8512 a gallon.

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