Natural gas futures wiped out their weekly gains on Thursday as the latest government data found that US inventories increased in the last week. With global demand cratering and production cuts not nearly as enough, natural gas prices might continue to trade below $2 for the rest of the year.
July natural gas futures tumbled $0.044, or 2.3%, to $1.865 per million British thermal units (btu) at 19:11 GMT on Thursday on the New York Mercantile Exchange. Natural gas had been on track for a weekly gain, but the massive drop erased its rally. Year-to-date, natural gas is down about 20%.
The US Energy Information Administration (EIA) reported that domestic stockpiles surged by 81 billion cubic feet for the week ending May 15, matching market forecasts earlier this week. In total, US supplies stand at 2.503 trillion cubic feet, up 779 billion cubic feet from the same time last year. Natural gas stocks are also 407 billion cubic feet above the five-year average.
Also, Baker Hughes confirmed that the nation’s natural gas rig count dipped by one to 79.
Last week, the International Energy Agency (IEA) wrote in its monthly outlook that global demand for natural gas is poised to plunge by 5% this year due to the international shutdown amid the COVID-19 pandemic. This is the largest decline since the energy source became mainstream 70 years ago.
Although output is sliding, analysts warn that it may not be enough to help rebalance the market. It was even suggested by some industry executives that natural gas may suffer the same fate as crude oil and drop below zero. Another factor against natural gas is that cooler temperatures are prevalent across the US, and most weather forecasts are not anticipating a heatwave in any part of the country until some time next month.
In other energy commodities, July West Texas Intermediate (WTI) crude oil futures jumped $0.41, or 1.22%, to $33.90 per barrel. July Brent crude futures dipped $0.01, or 0.03%, to $36.05 a barrel. July gasoline futures edged up $0.0015, or 0.14%, to $1.0453 a gallon. July heating oil futures shed $0.0055, or 0.53%, to $1.0314 per gallon.