Natural gas futures are extending their meteoric gains on Thursday after the US government reported a smaller-than-expected supply build. Natural gas is on track for a substantial weekly gain, but industry experts are anticipating a steep correction due to the enormous spikes in recent sessions. For now, investors are ebullient over the immense rally.
October natural gas futures soared $0.077, or 1.67%, to $4.692 per million British thermal units (btu) at 14:41 GMT on Thursday on the New York Mercantile Exchange. Natural gas is on track for weekly jump of 9%, adding to its year-to-date rally of 83%.
According to the US Energy Information Administration (EIA), domestic inventories of natural gas increased 20 billion cubic feet in the week ending August 27, less than the market forecast of 25 billion cubic feet.
In total, US natural gas supplies stand at 2.871 trillion cubic feet, which is 579 billion cubic feet less than the same time a year ago. They are also 222 billion cubic feet below the five-year average of 3.093 trillion cubic feet.
In the wake of Hurricane Ida, which has been downgraded to a tropical storm, production capacity has yet to return to 100%. Industry analysts are doubtful that output will be restored anytime soon, with production still below 90 billion cubic feet per day. Plus, several locations in the Gulf of Mexico, particularly in Louisiana, remain without power.
For now, natural gas prices are dealing with a supply and demand issue.
Of course, in the background is a look at the upcoming fall and winter seasons and their effects on prices. The early forecasts suggests that the US is expected to see warmer than normal and drier conditions, with only a few regions anticipated to brace for colder than normal temperatures. In some instances, snowfalls could impact many parts of the US amid a La Nina spell.
Meanwhile, the EIA reported that Appalachia is now the world’s third-largest natural gas producer, sitting behind Russia and the rest of the United States. EIA researchers pointed to pipeline takeaway capacity, which allows greater output to reach more demand markets, as one of the chief reasons for the Appalachian Basin’s substantial growth.
“From 2008 to 2020, total pipeline takeaway capacity from the Northeast increased from 4.5 Bcf/d to 24.5 Bcf/d, alleviating some congestion and supporting higher wholesale natural gas prices in the region,” the EIA noted.
In other energy commodities, October West Texas Intermediate (WTI) crude oil futures surged $1.69, or 2.46%, to $70.28 per barrel. November Brent crude futures soared $1.53, or 2.12%, to $73.11 a barrel. October gasoline futures climbed $0.0486, or 2.3%, to $2.1595 a gallon. October heating oil futures rose $0.0437, or 2.05%, to 2.1726 per gallon.