Thursday, March 11, 2021

Natural Gas Adds to Weakness After Smaller-than-Expected Supply Withdrawal

Natural gas futures slumped toward the end of the trading week after the US government reported a smaller-than-expected decrease. The bears are fully entrenched in natural gas markets as the bulls might be waiting for sweltering summer weather to make a move. Until then, long-term prospects could be driving prices following China’s imports in the first two months of 2021.

April natural gas futures dropped $0.041, or 1.50%, to $2.687 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 nearly 4%, paring their year-to-date gain to below 7%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas plunged 52 billion cubic feet in the week ending March 5. This fell short of the median estimate of 73 billion cubic feet.

In total, US supplies stand at 1.793 trillion cubic feet, down 257 billion cubic feet from the same time a year ago. They are also 141 billion cubic feet under the five-year average.

It has been a relatively quiet week for natural gas markets. As the bears take over natural gas prices, bulls are waiting for the latest weather models to make their move.

For the most part, weather forecasts are pointing to warm weather ahead, affecting demand for the so-called bridge fuel. Also, the recent expectation of frigid temperatures in mid-March might be less severe than initially anticipated.

Bespoke Weather Services wrote in a report:

The pattern still does not deviate too far from normal, though we have moved the 11- to 15-day time frame a little on the warm side of normal.

Longer range expectations remain for a warm lean late month into April, which is still bearish. As such, we are not expecting weather to assist natural gas bulls much anytime soon, at least until entering the true warm season.

It was recently reported that industry observers are calling for record-breaking temperatures this summer, with most of the heat concentrated in Texas. This could elevate natural gas prices as it would increase commercial and residential air-conditioning consumption.

Moreover, as the US economy begins to reopen, natural gas demand could continually increase. At the same time, a plethora of outlooks suggests that consumption and output of the energy commodity might not return to pre-pandemic levels until 2022 or 2023.

Investors were optimistic over long-term foreign demand following last month’s natural gas exports to China. After witnessing the coldest winter in decades, Chinese imports surged 17.4% to 28.68 billion cubic meters in January and February. As reports, domestic output desires might be an impossible feat because of its complex geology deposits, requiring massive investment.

This means China will remain a huge natural gas importer for the observable future, driving intense competition in the energy industry.

In other energy commodities, April West Texas Intermediate (WTI) crude oil futures rose $0.38, or 0.59%, to $64.82 per barrel. May Brent crude futures added $0.62, or 0.91%, to $68.50 a barrel. April gasoline futures jumped $0.0262, or 1.26%, to $2.1066 a gallon. April heating oil futures edged up by $0.0061, or 0.32%, to $1.9237 per gallon.

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Published under: Natural Gas

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