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Natural Gas Slips Despite Huge Fall in US Supplies

December 19, 2019 at 17:26 by Andrew Moran

Natural gas futures are slipping on Thursday, despite the US government reporting a bigger than expected drop in domestic stockpiles. The slide in natural gas prices might be explained by investors turning bearish on weather models potentially indicating a decline in North American demand.

February natural gas futures tumbled $0.02, or 0.87%, to $2.265 per million British thermal units (btu) at 16:12 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a weekly dip of about 0.5%, adding to its year-to-date loss of nearly 21%. Dating back to December 2018, natural gas has cratered 39%.

According to the US Energy Information Administration (EIA), domestic inventories have decreased by 107 billion cubic feet for the week ending December 13. This is greater than the median estimate of 93 billion cubic feet. In total, supplies stand at 3.411 trillion cubic feet, up 618 billion cubic feet from the same time a year ago. They are also nine billion cubic feet below the five-year average.

For the last month, it has been a case of will-they-or-wont-they for temperatures. The weather forecasts first show below-average temperatures and then the next batch of weather models indicate seasonal averages for this time of the year. Analysts have also been anticipating prices to plunge to around $2 per btu because of warmer temperatures.

Natural Gas Intelligence reports on the weather:

Weather models flipped milder at the end of last week and have continued to warm the outlook for the rest of December. As of early Tuesday, the projected total gas-weighted degree day (GWDD) count for this month sat only 16 above the very warm December the market saw last year (815 in 2019 versus 799 in 2018).

During the Christmas week, current forecasts suggest the winter weather will be tame for much of the US.

In other energy markets, January West Texas Intermediate (WTI) crude oil futures rose $0.36, or 0.59%, to $61.21 per barrel. February Brent crude futures tacked on $0.41, or 0.62%, to $66.58 per barrel. January gasoline futures added $0.025, or 1.5%, to $1.71 a gallon. January heating oil futures advanced $0.01, or 0.55%, to $2.03 a gallon.

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