Natural Gas Futures Plummet to Three-Month Low Amid Oversupply Concerns
Natural gas futures fell to their lowest level in over three months on Thursday, as a larger-than-expected storage build weighed on prices. The September contract traded at $2.642 per MMBtu, down 1.71% from the previous day's close. This decline marks the fifth consecutive week of price drops for natural gas.
The storage report released on Thursday showed that working gas inventories rose by 33 Bcf for the week ended July 31, exceeding consensus expectations of a 31 Bcf build. This increase in storage levels has been a persistent theme throughout the year, with inventories running approximately 6.4% above their five-year average.
Despite some modest tightening expected across August, September, and October, driven by liquefaction demand, the surplus is still expected to persist through much of the forecast horizon. With production near 111 Bcf per day and record output continuing to meet rising demand, the market remains oversupplied, limiting upward price pressure.
The current storage levels are a major concern for natural gas prices, as they reduce the likelihood of a scarcity premium driving up prices in the coming months. The surplus is expected to persist through the withdrawal season, with working inventories forecast to reach 3,966 Bcf by the end of October, 5% above the five-year average.