Natural gas futures fell below the crucial $4 mark on Thursday after the US government reported a significant supply build in domestic storages. Natural gas prices have had a challenging week amid demand concerns across North America and Europe. But the bulls might view this as an opportunity to buy the dip, particularly if early expectations for winter demand are accurate.
September natural gas futures tumbled $0.065, or 1.6%, to $3.994 per million British thermal units (btu) at 14:42 GMT on Thursday on the New York Mercantile Exchange. Natural gas is poised for a weekly drop of about 4%, paring its year-to-date spike to 57.5%.
According to the US Energy Information Administration (EIA), natural gas inventories increased 49 billion cubic feet in the week ending August 6. This matches the market forecast.
In total, domestic natural gas supplies stood at 2.776 trillion cubic feet, 548 billion cubic feet less than the same time a year ago. They are also 178 billion cubic feet below the five-year average of 2.954 trillion cubic feet.
For the last week, temperatures have eased in many parts of the US. Looking ahead, the latest weather models are mixed right now, and industry observers say this could continue the pattern of national demand remaining below the peak from two years ago.
Market analysts believe that bulls will continue to drive the natural gas market as they continue to buy the dip at every opportunity. This, they note, will ensure prices stay above the $4 mark.
Meanwhile, investors are keeping an eye on both the US and Japan’s latest efforts that could squeeze the liquefied natural gas (LNG) market. Washington is trying to place more of an emphasis on renewable energy, while Tokyo could start reducing its US natural gas imports as part of efforts to cut into its fossil fuel emissions.
“One of the biggest consequences is likely to be that it creates a lot of uncertainty for Japanese LNG importers,” said Jason Feer, global head of business intelligence at shipbroker Poten & Partners, in an interview with NatGasIntel. “It seems unlikely to me that you’re going to get a lot of these importers signing long-term contracts, 20-year contracts. Because they just have no idea what their demand is going to look like in 20 years. They don’t know what their demand is going to look like in 10 years.”
In other energy commodities, September West Texas Intermediate (WTI) crude oil futures slid $0.02, or 0.03%, to $69.23 per barrel. October Brent crude futures picked up $0.02, or 0.03%, to $71.46 a barrel. September gasoline futures shed $0.0217, or 0.94%, to $2.2805 per gallon. September heating oil futures dipped $0.0065, or 0.33%, to $2.0989 a gallon.