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Natural Gas Slumps on Bigger-Than-Expected Weekly Climb

September 5, 2019 at 15:24 by Andrew Moran

Natural gas futures are sliding on Thursday after the US government reported a bigger-than-expected weekly increase. With the global economy cooling down amid interruptions in international commerce, demand from major markets might decrease in the coming months until growth is resuscitated.

October natural gas futures tumbled $0.04, or 1.68%, to $2.405 per million British thermal units (btu) at 15:20 GMT on Thursday on the New York Mercantile Exchange. Despite plummeting 13% so far in 2019, natural gas prices have enjoyed 12% gains in the last month. The energy commodity is already on track for a 4% to 5% weekly gain.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas surged by 84 billion cubic feet for the week ending August 30. This is higher than the median estimate of 75 billion cubic feet. In total, stockpiles stand at 2.941 trillion cubic feet, up 383 billion cubic feet from the same time a year ago. They are also 82 billion below the five-year average.

There has been a lot of concern on global financial markets that major economies are beginning to experience a slowdown. The side effect of a downturn is that it will impact natural gas demand. One country already conceding that its demand for natural gas will stall is China.

Beijing confirmed that natural gas demand growth will slow from last year’s growth pace. Early estimates show that domestic consumption will increase just 10% to 310 billion cubic meters (bcm), down from 17.5% a year ago. However, the Chinese government still expects demand to grow for the next 30 years as the nation shifts from crude oil to natural gas.

During Wednesday’s CNN seven-hour climate town hall featuring several Democratic presidential candidates, there was a lot of bashing of natural gas. But Senator Amy Klobuchar (D-MN) refused to dismiss natural gas altogether, conceding that the energy source “will exist for a while.”

I see natural gas as a transition fuel. It is better than oil but not nearly as good as wind and solar. I am being honest on what we need to do. We won’t immediately get rid of it.

Meanwhile, Jerry Jones, the billionaire owner of the Dallas Cowboys, appeared on Bloomberg to defend his huge bet on natural gas. Jones said that he put $1.5 billion of his own money into Comstock Resources buying Covey Park Energy to raise its natural gas exposure, explaining that adding operations in the Haynesville shale basin is close to the coast and convenient for liquid natural gas (LNG) exports.

In other energy markets, October West Texas Intermediate (WTI) crude oil futures added $0.72, or 1.28%, to $56.98 per barrel. November Brent crude futures rose $0.95, or 1.57%, to $61.66 a barrel. October gasoline futures jumped $0.025, or 1.65%, to $1.56 per gallon. October heating oil futures edged up $0.02, or 1.21%, to $1.90 a gallon.

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