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Natural Gas Slumps 4% Despite Bigger-Than-Expected Supply Decline

December 27, 2019 at 16:57 by Andrew Moran

Natural gas futures are slumping as much as 4% at the end of the trading week, despite domestic inventories declining more than what the market had anticipated. After a green Christmas and above-average temperatures impacting prices, warm weather patterns are applying pressure to natural gas futures. Natural gas investors failed to see green this year as the energy commodity posted a double-digit loss.

February natural gas futures tumbled $0.085, or 3.72%, to $2.20 per million British thermal units (btu) at 15:41 GMT on Friday on the New York Mercantile Exchange. Natural gas is on track for a 3.8% loss during the holiday-shortened week. It is also poised for a 23% drop in 2019.

According to the US Energy Information Administration (EIA), domestic stockpiles fell by 161 billion cubic feet for the week ending December 20. The market had penciled in a decrease of 153 billion cubic feet. In total, inventories stand at 3.25 trillion cubic feet, up 518 billion cubic feet from the same time a year ago. They are also below the five-year average of 3.319 billion cubic feet.

Weather conditions have played a big factor in natural gas trading this month. What was initially expected to be a below-average winter has suddenly turned into either seasonal average or above-average. This month, the energy source has plummeted 11%, compared to the 10% gain in November when frigid temperatures and heavy snowfall blanketed most of North America.

Could these trends extend into 2020? The early forecasts are calling for a colder shift in the weather patterns during the first half of January, but some reports suggest that warmer temperatures could become the norm as the month progresses.

Typically, natural gas benefits when freezing temperatures are prevalent since it lifts demand. However, when temperatures are more bearable and require less heating, the demand for natural gas slips.

In other energy markets, February West Texas Intermediate (WTI) crude oil futures picked up $0.05, or 0.08%, to $61.73 per barrel. March Brent crude futures added $0.11, or 0.17%, to $66.87 a barrel. January gasoline futures were flat at $1.755 a gallon. January heating oil futures rose $0.0085, or 0.41%, to $2.06 per gallon.

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