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Natural Gas Slumps on Weekly US Supply Build

October 1, 2020 at 14:47 by Andrew Moran

Natural gas futures added to their weekly slide on Thursday after the US government reported an increase in domestic inventories. But with cooler temperatures expected to arrive in North America over the next ten days, could natural gas prices trigger a rally?

November natural gas futures dropped $0.047, or 1.86%, to $2.48 per million British thermal units (btu) at 14:42 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are on track for a weekly crash of nearly 14%, paring their year-to-date surge to around 13%.

According to the US Energy Information Administration (EIA), domestic natural gas inventories surged 76 billion cubic feet in the week ending September 25. The market had forecast. In total, US stockpiles stand at 3.756 trillion cubic feet, up 471 billion cubic feet from the same time a year ago. They are also 405 billion cubic feet above the five-year average of 3.351 trillion cubic feet.

Investors will be keeping a close eye on weather patterns to kick off October. The National Weather Service recently announced that there would be cooler temperatures in many parts of the US. Moreover, a lot of places across Canada are getting ready to dive into seasonal norms.

This is bullish for energy prices since colder weather would increase oil and gas consumption. But while the early forecasts suggest a cooler pattern forming over the next several days, Reuters recommends caution. The newswire’s commodities section wrote:

Although the greatest cool anomalies should be observed in Missouri and surrounding states, the risk for occasional and short-lasting overnight frost risks are on the rise across the upper Midwest. As for now, confidence in frost appearance is rather low, but the situation should be monitored and updated over the next week.

Overall, market sentiment is down due to slumping foreign demand amid the coronavirus pandemic. Many European markets are reporting an uptick in new infections, while the US economy’s recovery has been slower than expected. Plus, some major producing countries are reporting renewed oil and gas activity.

In other energy commodities, November West Texas Intermediate (WTI) crude oil futures plummeted $2.28, or 5.67%, to $37.94 per barrel. December Brent crude futures tumbled $2.11, or 4.99%, to $40.19 a barrel. November gasoline futures plunged $0.05, or 4.23%, to $1.1316 per gallon. November heating oil futures fell $0.0553, or 4.8%, to $1.0969 per gallon.

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