Commodity Blog

Commodity news, technical and fundamental analysis, market data on precious metals, energies, industrial metals, and soft commodities


Natural Gas Surges 4% on Smaller-Than-Expected Supply Jump

August 15, 2019 at 17:56 by Andrew Moran

Natural gas futures had one of their best trading sessions in recent months after the US government reported a smaller-than-expected build in domestic inventories. Natural gas has enjoyed the last few trading sessions higher, but the consensus is that prices will eventually dip below the crucial $2 threshold.

October natural gas futures surged $0.10, or 4.58%, to $2.24 per million British thermal units (btu) on Thursday on the New York Mercantile Exchange. Although prices are down 22% year-to-date, natural gas is poised for a strong weekly gain of about 8%. This is a welcome reprieve for the energy commodity that has been drowning in an ocean of red ink throughout 2019.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas climbed by 49 billion cubic feet for the week ending August 9. This is smaller than the market forecast of 54 billion. In total, stockpiles stand at 2.738 trillion cubic feet, up 357 billion cubic feet from the same time a year ago. Also, they are 111 billion below the five-year average.

Wall Street anticipates that natural gas will soon fall underneath the important $2 mark. There are seemingly two issues plaguing industry: uncertainty in global markets and the US shale gas boom.

The US-China trade war is continuing and natural gas has already been utilized as a pawn. Beijing is reducing its imports of liquid natural gas (LNG) from the US, turning to other countries that produce the energy source. But with China transitioning from coal to natural gas, other nations may not be able to fulfill the demand from the world’s second-largest economy.

Meanwhile, American producers are not slowing down operations. Even as prices trade at their lowest levels since 2016, output has topped 100 billion cubic feet per day, up more than 35% from 2013.

Supplies remain 4% under their five-year averages, but stocks are being replenished. Analysts suggest that the supply deficit to the five-year average could narrow by the end of the month. This would put a further strain on prices.

In other energy markets, October West Texas Intermediate (WTI) crude oil futures dropped $1.06, or 1.92%, to $54.17 per barrel. November Brent crude futures tumbled $1.46, or 2.45%, to $58.02 a barrel. September gasoline futures shed $0.04, or 2.45%, to $1.63 per gallon. September heating oil futures fell $0.03, or 1.8%, to $1.81 a gallon.

If you have any questions and comments on commodities today, use the form below to reply.

Leave a Reply