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Natural Gas Turns Negative on Disappointing Supply Withdrawal

February 11, 2021 at 15:45 by Andrew Moran

Natural gas futures turned negative after the US government reported a smaller-than-expected decrease in domestic inventories. The market had forecast a much larger supply withdrawal amid freezing temperatures and snow hitting many parts of the US. However, the disappointing weekly report suggested energy demand may not be as fierce in the middle of one of the coldest Februarys on record.

March natural gas futures tumbled $0.022, or 0.76%, to $2.883 per million British thermal units (btu) at 14:41 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are on track for a weekly loss of 0.5%, although they are still up about 16% year-to-date.

According to the US Energy Information Administration (EIA), domestic inventories declined 171 billion cubic feet for the week ending February 5. This is lower than the median estimate of 181 billion cubic feet.

Market analysts believe that the report will setup the next two withdrawals. Despite the US experiencing a deep freeze last week, inventory levels were unable to shrink at a level greater than the previous week’s report.

In early trading, it was clear that the market is confident that Arctic-like temperatures will blanket much of the US over the next several days. If forecasts are accurate, and the severe cold weather impacts the Rockies, the South, and the Midwest, energy demand would spike and freeze-offs would become more pronounced.

But investors will be looking ahead to the end of February, when the frigid temperatures begin to dissipate and the weather returns to a more comfortable range. Still, February 2021 is poised to have a record month for freezing temperatures, landing on the top five.

Can cold air be enough to support natural gas prices at $3? This month, it has been a volatile market, so it could be more choppy trading until winter is over.

In other energy commodities, March West Texas Intermediate (WTI) crude oil futures shed $0.14, or 0.24%, to $58.54 per barrel. April Brent crude futures fell $0.12, or 0.2%, to $61.35 a barrel. March gasoline futures edged up by $0.0054, or 0.33%, to $1.6588 per gallon. March heating oil futures dipped $0.0018, or 0.1%, to $1.7591 a gallon.

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