Natural gas futures are slipping toward the end of the trading week after the US government reported a smaller-than-expected supply withdrawal. Natural gas prices have had a strong start to the new year, poised for an exceptional weekly gain. Can the energy commodity touch $4 this month?
February natural gas futures tumbled $0.029, or 0.78%, to $3.681 per million British thermal units (btu) at 15:27 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are on track for a weekly gain of 6%.
According to the US Energy Information Administration (EIA), domestic natural gas inventories fell by 31 billion cubic feet in the week ending December 31, smaller than the market estimate of a 54 billion cubic feet drawdown. This is also lower than last week’s withdrawal of 136 billion cubic feet.
In total, US natural gas supplies stand at 3.195 trillion cubic feet, less than the 154 billion cubic less from the same time a year ago. They are also within the five-year historical range of 3.195 trillion cubic feet.
Market analysts are alluding to a wide variety of factors that coincided at the same time pertaining to the smaller drawdown. The factors consisted of warmer than normal temperatures, weak demand due to Christmas, lighter export demand, better domestic output, and higher-than-normal wind generation.
“Holiday weeks are always tricky, but this one also featured very low demand, with record warmth for much of the Midwest and South,” Bespoke Weather Services said. “How did we miss by so much? We felt there was actually enough heat in parts of the South so that cooling demand would have more impact than it actually did, apparently. In terms of the supply/demand balance, it looks very loose in our model.”
Meanwhile, industry observers note that the bearish propositions appear to have been priced in as of late.
Does this mean blast-off for natural gas prices or more of a downturn? The consensus is that the so-called bridge fuel will trend higher in 2022, but the gains will not replicate 2021.
In other energy commodities, February West Texas Intermediate (WTI) crude oil futures advanced $1.86, or 2.39%, to $79.71 per barrel. March Brent crude futures tacked on $1.50, or 1.86%, to $82.30 a barrel. February gasoline futures rallied $0.0248, or 1.08%, to $2.3169 per gallon. February heating oil futures jumped $0.0331, or 1.35%, to $2.4794 a gallon.