Natural Gas Craters Below $8 on Surprise US Supply Build

Natural gas futures plunged on Thursday after the US government reported a surprise build in domestic stockpiles. The energy commodity has struggled this week, joining the broader commodities market decline. The selloff has been driven by lackluster cooling demand, as well as reports suggesting greater capex investments amid surging inflation.

September natural gas futures plummeted $0.427, or 5.17%, to $7.84 per million British thermal units (Btu) at 14:40 GMT on Thursday on the New York Mercantile Exchange. Over the last month, natural gas has gained 30.3%, but it is on track for a weekly loss of about 2%. Year-to-date, natural gas prices are still up more than 120%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas increased 41 billion cubic feet in the week ending July 29, higher than the market estimate of 29 billion cubic feet. This is up from the 41-billion-cubic-foot build.

In total, US supplies stand at 2.457 trillion cubic feet, down 268 billion cubic feet from the same time a year ago. They are also 337 billion cubic feet below the five-year average.

Natural gas prices had soared Wednesday after it was reported that a consent agreement was reached between Freeport LNG terminal and the Pipeline and Hazardous Materials Safety Administration. This means that the chances of a return to full service of approximately two billion cubic feet per day in October are possible.

“An interesting day is on tap, given the recent news combined with an EIA report this morning, and some subtle changes in the weather forecast that suggest demand will not drop off very much for very long,” Bespoke Weather Services told clients early Thursday. “In a nutshell, the big picture is easily more bullish given some confidence that Freeport will indeed be back in October.”

Meanwhile, summer temperatures took a back seat to the latest news. Plus, investors are beginning to look ahead to the fourth quarter, anticipating a tightness level of more than 100 billion cubic feet. This could enhance the technical support for the energy commodity and allow for bulls to buy any dip in prices.

In other energy commodities, September West Texas Intermediate (WTI) crude oil futures dropped $0.71, or 0.78%, to $89.95 a barrel. October Brent crude futures fell $1.10, or 1.14%, to $95.68 per barrel. September gasoline futures shed $0.0519, or 1.78%, to $2.862 a gallon. September heating oil futures slid $0.0174, or 0.52%, to $3.397 per gallon.

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