Natural gas futures are plummeting after the US government reported a larger-than-expected increase in domestic inventories. Natural gas has been holding steady over the last week ahead of the report, with many investors sitting on the sidelines waiting to see what would happen with US stocks.
June natural gas futures declined $0.051, or 1.68%, to $2.976 per million British thermal units (btu) at 14:42 GMT on Thursday on the New York Mercantile Exchange. Natural gas is still poised for a weekly gain of about 1%, bringing its year-to-date surge to 17.5%.
According to the US Energy Information Administration (EIA), domestic inventories of natural gas surged 115 billion cubic feet in the week ending May 21. This is higher than the median estimate of 104 billion cubic feet, and it is up from last week’s build of 71 billion cubic feet.
In total, US natural gas stocks stand at 2.215 trillion cubic feet, down 381 billion cubic feet from the same time a year ago. They are also 63 billion cubic feet below the five-year average.
This had been considered a critical report for natural gas prices as it may set the stage for the month of June. Over the last couple of weeks, temperatures have been cooler than normal and have fallen short of the warmer weather expectation in many parts of the United States.
Since early spring, industry experts have been warning about soaring temperatures that would engulf most of the US this summer, particularly in the south. Unfortunately for the bulls, if temperatures do not start heating up soon, the bears could overtake the natural gas market heading into the halfway point of 2021.
The latest peek at overnight weather data suggests little changes in both US and European patterns. This could make it challenging for July and perhaps even August contracts to hover around the $3 range.
On the industry front, new data from the EIA highlight that the average total supply of natural gas declined by 0.3% compared to the same time a week ago, suggesting that output was relatively unchanged week-over-week. Average net imports from Canada also slumped 6.2% from a week ago.
Overall, in the near- to medium-term, market analysts are predicting prices to slide below $2.97.
In other energy commodities, June West Texas Intermediate (WTI) crude oil futures were flat at $66.21 per barrel. July Brent crude futures shed $0.015, or 0.22%, to $68.60 a barrel. June gasoline futures slipped $0.013, or 0.6%, to $2.1382 a gallon. June heating oil futures slumped $0.0055, or 0.27%, to $2.0385 per gallon.