Natural gas futures settled lower on Thursday after the US government reported a lower-than-expected drawdown in domestic stockpiles. Natural gas prices plunged below $2.60 before paring their losses, with investors bullish on polar vortex weather eating into next week’s inventory report. Is natural gas headed back to $3, or will it slide back to around $2.30?
March natural gas futures tumbled $0.02, or 0.74%, to $2.682 per million British thermal units (btu) at 20:04 GMT on Thursday on the New York Mercantile Exchange. After some hiccups last week, natural gas has been on a tear, rising about 8% this week. The so-called bridge fuel is poised for a 6% monthly gain.
According to the US Energy Information Administration (EIA), domestic supplies of natural gas decreased by 128 billion cubic feet for the week ending January 22. The market had penciled in a decline of 136 billion cubic feet. In total, inventories stand at 2.881 trillion cubic feet, up 78 billion cubic feet from the same time a year ago. They are also 244 billion cubic feet above the five-year average.
March contracts had traded at $2.658 before the data was released.
Energy markets are monitoring US politics and President Joe Biden’s executive order of a 60-day freeze on new federal drilling permits and leases on federal lands and offshore waters.
The industry views it as “catastrophic” for businesses involved in drilling. Republican officials have already introduced billions to prevent moratoriums on federal leasing. Despite the negative effects on business, market analysts say this would be beneficial for prices since it would reduce supply in the broader market.
That said, the executive order does not affect existing leases.
Meanwhile, bullish investors are still holding out for intensifying winter weather conditions. After above-average seasonal temperatures, the bulls had lost hope, caving to the pressure from the bears. However, over the last week, subzero wind chills have blanketed the US, Canada, and parts of Europe. This has led to renewed momentum in demand and prices.
Bespoke Weather Services had this as a special midweek statement:
Once again, the changes in the weather forecast are to the colder side, enough to now move the 15-day forecast as a whole a little colder even versus the long-term, 30-year normal.
Much of the colder change the last several days has been centered around more storm-induced variability than projected a week ago, as opposed to a true cold outbreak coming out of Canada. But that narrative changes in the 11- to 15-day period, as a stronger cold air mass is expected to push southward out of Canada into the U.S. Its focus appears to be in the middle of the nation…as opposed to hitting the more populated East and South, though it still looks like enough for a few days of above-normal demand.
In other energy commodities, March West Texas Intermediate (WTI) crude oil futures tumbled $0.57, or 1.08%, to $52.28 a barrel. March natural gas futures dipped $0.03, or 0.05%, to $55.07 per barrel. March gasoline futures edged up by $0.0035, or 0.22%, to $1.5751 per gallon. March heating oil futures slipped $0.0086, or 0.53%, to $1.5990.