Natural Gas Extends Losses on Huge US Supply Build, Waning Demand

Natural gas futures extended their losses on Thursday after the US government reported a much larger-than-expected build in domestic supplies. The energy commodity has weakened considerably since topping $8 again, driven by moderate temperatures across the US and strengthening output levels.

October natural gas futures tumbled $0.384, or 4.94%, to $7.395 per million British thermal units (Btu) at 16:47 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are down more than 10% this week, but they remain up nearly 107% year-to-date.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas surged 103 billion cubic feet in the week ending September 16, up from 77 billion cubic feet in the previous week. This also topped the market’s estimate of 93 billion cubic feet.

In total, US supplies of natural gas stand at 2.874 trillion cubic feet, down 197 billion cubic feet from the same time a year ago. They are also 332 billion cubic feet below the five-year 3.206 trillion cubic feet.

Production has been one of the main factors in the energy commodity’s downward trend. US output has totaled approximately 100 billion cubic feet per day, an all-time high, this month. Many industry observers warned that domestic production would barely top 93 billion cubic feet this month.

In addition, weather-driven demand has waned this month as temperatures have been moderate to finish the summer season. So far, Hurricane Fiona has not made a dent to US energy markets.

Meanwhile, Moody’s Investors Service reports that global energy company earnings could ease next year amid slower demand growth and an economic slowdown.

“The pace of improvement in fundamental industry conditions will also decelerate after a strong post-lockdown rebound in earnings and credit quality during 2021-2022,” according to the credit ratings team led by Elena Nadtotchi, senior vice president. “Industry earnings will stabilize overall in 2023, but will still reach levels close to recent peaks.”

In other energy commodities, October West Texas Intermediate (WTI) crude oil futures advanced $0.91, or 1.1%, to $83.85 per barrel. November Brent crude futures climbed $0.88, or 0.98%, to $90.71 a barrel. October gasoline futures rose $0.0321, or 1.22%, to $2.5169 per gallon. October heating oil futures jumped $0.0547, or 1.68%, to $3.3162 a gallon.

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