Natural Gas Slumps on US Supply Build, Capped by Strong LNG Exports

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Natural gas futures are plunging toward the end of the trading week after the US government reported a slightly bigger-than-expected build in domestic inventories. The energy commodity has been surging this week, but the disappointing storage figures gave the so-called bridge fuel a moment to breathe.

August natural gas futures plummeted $0.058, or 1.47%, to $3.902 per million British thermal units (btu) at 14:40 GMT on Thursday on the New York Mercantile Exchange. Despite the steep drop, natural gas prices are poised for a weekly gain of about 9%, adding to their year-to-date rally of 55%.

According to the US Energy Information Administration (EIA), domestic natural gas inventories increased 49 billion cubic feet in the week ending July 16. This is higher than the median estimate of 44 billion cubic feet.

In total, US natural gas supplies stand at 2.678 trillion cubic feet, which is 532 billion cubic feet less than the same time a year ago. They are also 176 billion cubic feet below the five-year average f 2.854 trillion cubic feet.

Foreign demand remains strong for US natural gas exports. Mexico has been purchasing enormous volumes of US, helping drive up the price of US natural gas. Meanwhile, US liquid natural gas (LNG) cargoes shipped to Brazil increased to record levels as the South American country endures a historic drought.

That said, US LNG imports into Latin America keep skyrocketing, skyrocketing as much as 94% in the first six months of 2021 compared to the same time a year ago.

On the weather front, hot temperatures have been prevalent in the West and Mid-Atlantic regions of the US. It has been warm, wet, and humid throughout the country, and these conditions are forecast to remain the same next week. This could reduce the supply build for the rest of summer.

In other energy commodities, September West Texas Intermediate (WTI) crude oil futures climbed $0.53, or 0.75%, to $70.83 per barrel. October Brent crude futures jumped $0.54, or 0.75%, to $72.77 a barrel. August gasoline futures tacked on $0.0257, or 1.16%, to $2.2424 per gallon. August heating oil futures rose $0.0135, or 0.61%, to $2.1013 a gallon.

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