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Natural Gas Slumps As Total Inventories Top 10-Month High

October 18, 2018 at 15:09 by Andrew Moran

Natural gas futures are tumbling on Thursday after the US government reported that domestic inventories rose slightly less than the market had anticipated. Traders are paying attention to another key facet of the report: Total stockpiles have risen to their highest levels in about 10 months.

January natural gas futures fell $0.54, or 1.57%, to $3.38 per million British thermal units (btu) at 15:45 GMT on Thursday on the New York Mercantile Exchange. Natural gas has erased most of its gains this week, leaving the energy commodity flat over the last five trading sessions.

Year-to-date, natural gas has surged more than 10%.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas climbed by 81 billion cubic feet for the week ending October 12, which is lower than the 85 billion increase that analysts had projected. In total, supplies stand at 3.037 trillion cubic feet, down 601 billion cubic feet from the same time a year ago. They are also 605 billion below the five-year average. The last time natural gas storage levels topped three trillion was in December 2017.

Natural gas has been rallying in recent weeks on reports of below-average cold weather that is forecast to sweep the US. This is bullish for natural gas because inventories sit at decade lows.

Jacob Meisel, Bespoke Weather Services chief weather analyst, told CNBC:

It’s a different pattern. You’re seeing more risk that cold air masses get trapped across the East. Before, it looked like we’d get warm Pacific air into the East.

While a warmer November and December are expected, the experts say that there will be frigid temperatures in January and February.

In October, we’re actually looking at a top-five cooling demand days and a top-five heating demand. We started with near-record heat, and we flipped to cold. You always expect to get several weeks of low energy demand, and that’s not happening.

How do natural gas prices look over the next couple of months? Some investors say they could top $4.

In other energy commodities, December gasoline futures shed $0.02, or 1.00%, to $1.90 per gallon. December heating oil futures were relatively unchanged at $2.31 a gallon.

On Wednesday, the EIA reported that US crude oil inventories increased by 6.5 million barrels, gasoline stockpiles fell by two million barrels, and distillate supplies slipped by 800,000 barrels.

December West Texas Intermediate (WTI) crude futures dropped $0.16, or 0.27%, to $69.51 a barrel. December Brent crude futures declined $0.46, or 0.57%, to $79.57 per barrel.

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