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Natural Gas Surges 1% on EIA Report, US Remains Top Producer

October 25, 2018 at 17:31 by Andrew Moran

Natural gas futures are surging more than 1% after the US government reported a larger-than-expected build in domestic inventories. A separate report found that the US remains the top producer in the world. The surprise rally also came after a key weather organization forecast a mild winter for much of the US, a trend that could boost stockpiles.

November natural gas futures surged $0.042, or 1.33%, to $3.208 per million British thermal units (btu) at 17:04 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices have been trading lower in recent sessions, and they are on track for a weekly decline.

Year-to-date, natural gas has advanced more than 12%.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas increased by 58 billion cubic feet for the week ending October 19, which is higher than the market forecast of 54 billion. In total, inventories stand at 3.095 trillion cubic feet, down 606 billion cubic feet from the same time a year ago. They are also 624 billion below the five-year average.

Eni, an oil industry organization, reported that the US is still the world’s biggest natural gas producer. The report shows that US output for 2017 was 26.6 trillion cubic feet, followed by Russia’s 24.4 trillion cubic feet, Iran’s 7.6 trillion cubic feet, and Canada’s 6.5 trillion cubic feet.

In 2010, Russia topped the list with 22.7 trillion cubic feet.

Claudio Descalzi, Eni CEO and General Manager, stated in the foreword of the report:

Gas demand has been strong in 2017 (+3.3 percent), well above the average growth rates of the last decade. Consumption grew in all the regions, especially in Asia-Pacific and China where Battle for Blue Skies policies supported coal-to-gas switch. Europe kept growing for the third year in a row with a robust +4.9 percent.

Australian production, thanks to LNG contributions, recorded a tremendous increase (+21 percent) while United States is still the world’s largest natural gas producer even if its 2017 production increase was marginal (+0.7 percent).

Recently, the National Oceanic Atmospheric Administration (NOAA) projected that most of the US may experience a mild winter this year. Researchers forecast that temperatures are unlikely to dip below average from December to February, and many northern and western areas of the nation are expected to witness warmer-than-normal conditions. The mild weather is because of El Nino.

The NOAA’s numbers contradict other forecasts from reputable outlets that suggest the US is bracing for a cold-than-normal winter.

If the NOAA is correct, then it would be bearish for natural gas since fewer households would require heating, a trend that would build domestic inventories of the energy supply.

In other energy commodities, December West Texas Intermediate (WTI) crude oil futures rose $0.41, or 0.67%, to $67.24 per barrel. December Brent crude futures jumped $0.43, or 0.59%, to $76.62 a barrel. December gasoline futures fell $0.01, or 0.55%, to $1.80 per gallon. December heating oil futures tacked on $0.02, or 0.83%, to $2.27 a gallon.

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