Natural Gas Crashes Amid Small Supply Withdrawal, Warmer Weather

Natural gas futures crashed on Thursday, even before the US government released its weekly supply report. As warmer winter weather and limited consumption become the themes of the natural gas market, the bears have taken control of the energy commodity. Could prices slide below $2 before the summer?

April natural gas futures cratered $0.077, or 3.01%, to $2.478 per million British thermal units (btu) at 14:40 GMT on Thursday on the New York Mercantile Exchange. Natural gas is poised for a weekly decline of about 9%, wiping out its year-to-date gain and bringing the so-called bridge fuel’s 2021 loss to more than 2%.

According to the US Energy Information Administration (EIA), domestic supplies of natural gas fell only 11 billion cubic feet in the week ending March 12. This is below the median estimate of 17 billion cubic feet. It is also down from last week’s 52 billion cubic feet withdrawal.

In total, natural gas inventories stand at 1.782 trillion cubic feet, down 253 billion cubic feet from last year. They are also 93 billion cubic feet below the five-year average.

Is the US energy market preparing for greater supplies coming online? Earlier this week, the EIA confirmed that four new natural gas pipelines have gone into service since November, increasing the sector’s capacity to transport by approximately 4.4 billion cubic feet per day. The pipelines were Saginaw Trail Pipeline of Consumer Energy, Buckeye Xpress Project, Agua Blanca Expansion Project of Whitewater/MPLX, and Kinder Morgan’s Permian Highway Pipeline.

The EIA is noting that additional natural gas pipelines could come online over the next three years, although President Joe Biden has vowed to transition the country to renewable energy by slashing federal support for fossil fuels. Also, the White House recently lent support to a natural gas pipeline project in a legal battle regarding an eminent domain case that went to the Supreme Court.

On the weather front, aside from the winter storm and additional blizzard warnings throughout Colorado, the rest of the country is expected to see warmer temperatures in the coming weeks. This would affect natural gas demand, meaning that the bulls will potentially have to wait until the summer before demand would increase again.

In other energy commodities, April West Texas Intermediate (WTI) crude oil futures plummeted $1.75, or 2.71%, to $62.88 per barrel. May Brent crude futures shed $1.87, or 2.75%, to $66.17 a barrel. April gasoline futures plunged $0.0456, or 2.23%, to $2.0026 per gallon. April heating oil futures declined $0.0528, or 2.81%, to $1.8525 a gallon.

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Published under: Natural Gas

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