Natural Gas Prices Slip Despite Massive US Supply Drawdown

Natural gas futures slipped on Thursday after the US government reported a slightly higher-than-expected withdrawal of domestic inventories. Natural gas prices are still poised for a weekly gain as frigid temperatures chisel away at US inventories.

March natural gas futures tumbled $0.052, or 1.46%, to $3.513 per million British thermal units (Btu) at 14:51 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for a weekly gain of about 8% and is up 13% year-to-date.

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According to the US Energy Information Administration (EIA), domestic natural gas stockpiles plummeted 258 billion cubic feet for the week ending Jan. 10, up from the previous week’s drawdown of 40 billion cubic feet. This was slightly higher than the consensus forecast of 255 billion cubic feet.

The withdrawal was broad-based, led by South Central (93 billion cubic feet), Midwest (73 billion cubic feet), and East (68 billion cubic feet).

In total, US supplies stand at 3.115 trillion cubic feet, down 111 billion cubic feet from the same time a year ago. They are also 77 billion cubic feet above the five-year average.

With the weather outlook signaled more Arctic air entering February, prices could observe more gains, says Phil Flynn, an energy strategist at The PRICE Futures Group.

“If indeed we see the Arctic winter extended into February it will be a game changer for not only oil but natural gas. The potential for extreme upward movements in both oil and gas are very possible. This is what we’ve been talking about for a while. We hope that you put on your hedges,” Flynn said in a note.

Energy markets have gone gangbusters in recent weeks, driven by recent temperatures and sanctions. But they did the pause button toward the end of the trading week.

Here is the breakdown of prices: February West Texas Intermediate (WTI) crude oil futures tumbled $0.83, or 1.05%, to $77.87 a barrel. March Brent crude futures declined $0.78, or 0.95%, to $81.25 per barrel. February gasoline futures shed $0.0429, or 1.99%, to $2.116 a gallon. February heating oil futures picked up $0.01, or 0.4%, to $2.63 per gallon.

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