Natural gas futures are rallying on Thursday after the US government reported a smaller-than-expected storage build. The energy commodity had been enduring a selloff this week before the recent gains. But can the so-called bridge fuel sustain the momentum amid the decline in the broader financial markets?
August natural gas futures surged $0.068, or 1.89%, to $3.664 per million British thermal units (btu) at 14:42 GMT on Thursday on the New York Mercantile Exchange. Despite the substantial gains, natural gas is on track for a weekly loss of about 1%, paring its year-to-date spike to below 43%.
According to the US Energy Information Administration (EIA), natural gas inventories had a build of 16 billion cubic feet in the week ending July 2, coming in less than the median estimate of 34 billion cubic feet. This is down from the 76 billion cubic feet from last week.
In total, domestic supplies stand at 2.574 trillion cubic feet, down 551 billion cubic feet from the same time a year ago. They are also 190 billion cubic feet below the five-year average.
This was a bullish report, considering that there was record heat in the northwest region of the US, and conditions in the east were higher than normal. Many parts of the US are anticipating hotter weather to return later next week, but some cooler trends are anticipated in the coming days.
EBW analysts said in a report:
“Hotter weather is expected to return, but not until next Tuesday. After the sell-offs of the past two days, a bullish report may be necessary to limit further near-term selling…A build above 30 Bcf could trigger further selling, potentially driving August back into the $3.40s. An injection in the mid-20s could help to stabilize prices. An even smaller build near 20 Bcf or even smaller could send prices back up.”
In other industry news, the International Energy Agency (IEA) forecast steady growth in liquid natural gas (LNG) imports from the US to Mexico. According to the recent report, the US is estimated to see its natural gas exports to Mexico advance by 10% until 2024.
In the first half of 2021, LNG flows through a pipeline to Mexico increased 15% year-over-year, despite a temporary interruption in February because of a devastating winter storm. Market analysts are attributed to new pipelines and added capacity for the notable gains.
The IEA noted in the same reported that North American natural gas demand is projected to swell 1% per year. Globally, natural gas demand is expected to rise by 3.6% this year before easing to around 1.7% from 2022 to 2024.
“The rebound in gas demand shows that the global economy is recovering from the shock of the pandemic and that gas is continuing to replace more emissions-intensive fuels,” said IEA’s Keisuke Sadamori, director of Energy Markets and Security, in a statement.
“But stronger policies need to be implemented to put global gas demand on a path in line with reaching net-zero emissions by 2050 while still fostering economic prosperity. These include measures to ensure gas is used more efficiently.”
In other energy commodities, August West Texas Intermediate (WTI) crude oil futures tumbled $0.28, or 0.39%, to $71.92 a barrel. September Brent crude futures slipped $0.17, or 0.23%, to $73.26 per barrel. August gasoline futures were flat at $2.2057 per gallon. August heating oil futures were also unchanged at $2.0886 a gallon.