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Natural Gas Slumps 1% Despite Huge Drop in Domestic Supplies

January 30, 2020 at 16:13 by Andrew Moran

Natural gas futures are slumping more than 1% on Thursday after the US government reported a massive but smaller than expected drop in domestic inventories. The energy commodity might be trading lower as the latest forecasts suggest that warmer temperatures could be the norm throughout February, a weather trend that would affect demand.

March natural gas futures tumbled $0.025, or 1.38%, to $1.84 per million British thermal units (btu) at 14:51 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are on track for a steep weekly loss of 5%, adding to their year-to-date declines of 16%.

Natural gas prices are testing January lows of $1.83. Experts are already warning that if they slip below this level, then they could test 2016 lows of $1.61.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas decreased by 201 billion cubic feet for the week ending January 24. The market had penciled in a drop of 207 billion cubic feet. In total, inventories stand at 2.746 trillion cubic feet, up 524 billion cubic feet from the same time a year ago. In total, supplies are 193 billion cubic feet above the five-year average.

It looks like the previous calls for frigid temperatures to start February are being tossed aside. The latest weather data from NatGasWeather suggests there will be milder trends during the first eight days of next month. There may be a surge of cold air in the Midwest and Northeast for a couple of days, but the main period that could lead to subzero temperatures is February 9–13.

The website did note:

“Over the past several months, in most instances, when the pattern looked quite cold at days 12–15, the weather trended notably milder as these days rolled into the day five to 11 period, which could occur again here.”

Meanwhile, in industry news, the EIA projects that renewable energy will eventually surpass natural gas in America’s electric grid. This is a reversal from last year’s position when the government agency said natural gas would continue to be the nation’s top source of electricity by 2050. In its 2020 Annual Energy Outlook, the EIA predicted that renewables will account for 38% of electricity in 30 years, up from 19% today, and the share in natural gas will dip from 37% today to 36% in 2050.

In other energy markets, February West Texas Intermediate (WTI) crude oil futures fell $1.19, or 2.23%, to $52.10 per barrel. March Brent crude futures shed $1.43, or 2.43%, to $57.47 a barrel. February gasoline futures plunged $0.041, or 2.7% to $1.49 per gallon. February heating oil futures shed $0.045, or 2.6%, to $1.65 a gallon.

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