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Natural Gas Slumps Despite Drop in US Supplies

March 5, 2020 at 16:28 by Andrew Moran

Natural gas futures have hit the pause button on the recent rebound as they are sliding more than 1% on Thursday, despite the US government reporting a slightly larger than expected drop in domestic stockpiles. Although warmer temperatures and the coronavirus decimating global financial markets, investor sentiment remains bearish. But with US output forecast to slow down amid the global supply glut, will traders buy the dip?

April natural gas futures tumbled $0.03, or 1.64%, to $1.80 per million British thermal units (btu) at 15:10 GMT on Thursday on the New York Mercantile Exchange. Natural gas is poised for a weekly boost of more than 3%, but prices are still down nearly 18%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas declined 109 billion cubic feet for the week ending April 28. The market had penciled in a decrease of 105 billion cubic feet. In total, supplies stand at 2.091 trillion cubic feet, up 680 billion cubic feet from a year ago. They are also 176 billion cubic feet above the five-year average.

During the final days of winter, temperatures remain above average, though they are predicted to drop into a frigid territory in the final week of the season. The energy commodity had been climbing in recent sessions on factors outside of weather, which may be befuddling markets since supply remains strong and demand could slump in the coming months. But analysts warn output will soon slow down as international markets are flooded with natural gas.

Industry observers note that the natural gas market’s medium-term future will depend mostly on key importers. Because Covid-19 has significantly harmed Europe, China, Japan, and South Korea, their liquid natural gas (LNG) imports could take a nosedive in the first half of 2020. In the US, if the coronavirus outbreak worsens, the energy sector could halt operations.

In other energy markets, April West Texas Intermediate (WTI) crude oil futures edged up $0.24, or 0.51%, to $47.02 per barrel. May Brent crude futures picked up $0.16, or 0.31%, to $51.29 a barrel. April gasoline futures shed $0.01, or 0.65%, to $1.566 per gallon. April heating oil futures rose $0.0025, or 0.18%, to $1.536 a gallon.

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