Natural Gas Pares Gains on US Supply Build — Investors Still Bullish on Summer Weather

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Natural gas futures are paring their gains on Thursday after the US government reported a build in domestic stockpiles. Natural gas had been rallying as much as 2% toward the end of the trading week, but the substantial increase in stockpiles turned traders bearish. But with rising temperatures and strengthening demand, prices will more than likely accelerate throughout the month.

July natural gas futures rose $0.034, or 1.09%, to $3.163 per million British thermal units (btu) at 14:43 GMT on Thursday on the New York Mercantile Exchange. The energy commodity is poised for a weekly gain of nearly 4%, bringing its year-to-date surge to nearly 26%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas increased 98 billion cubic feet in the week ending June 4. This matches the market forecast of 98 billion cubic feet. This is also unchanged from the 98 billion cubic feet build in the previous week.

In total, US supplies stand at 2.411 trillion cubic feet, down 383 billion cubic feet from the same time a year ago. They are also 55 billion cubic feet below the five-year average.

Industry observers had been warning that this month’s storage reports would be critical for prices in the short-term. But it seems that weather is playing a much larger role right now for the natural gas market.

Investors were pleased by the latest estimates suggesting that higher temperatures could extend into September. For now, traders are content with the expectation temperatures for the remainder of June and heading into July will be higher than normal.

The EIA also published the June edition of its Short-Term Energy Outlook (STEO), projecting that 2021 prices will average around $3.05, up from its prediction last month.

Analysts are pointing to strengthening demand across the US, particularly in the western and southern states amid spiking temperatures and droughts.

In other sector news, US pipeline exports to Mexico have hovered close to all-time highs, approaching seven billion cubic feet per day. Moreover, US production has been averaging about 91 billion cubic feet per day this year, higher than the average last year. However, this output is slightly below the 2019 level.

China was also in the focus this week. According to the General Administration of Customs, Chinese natural gas imports surged 31.67%, while crude oil purchases slumped 14.6%.

In other energy commodities, July West Texas Intermediate (WTI) crude oil futures rose $0.32, or 0.46%, to $70.28 per barrel. August Brent crude futures advanced $0.36, or 0.5%, to $72.58 a barrel. July gasoline futures jumped $0.0119, or 0.54%, to $2.2145 per gallon. July heating oil futures added $0.0153, or 0.69%, to $2.1443 per gallon.

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