For all the heat waves and hurricanes that have wreaked havoc in America this year, nothing has stopped the nation’s natural gas supplies from swelling, with a massive stockpile gain blindsiding traders on Thursday and sending prices plunging by the most in almost two years.
U.S. inventories of the heating and cooling fuel expanded by 89 billion cubic feet to 3.614 trillion cubic feet last week, well above any analyst’s expectations. Stocks are growing despite two back-to-back heat waves that broke records across the western U.S., extreme temperatures that baked New York earlier this year, multiple hurricanes that have temporarily shut gas rigs across the Gulf of Mexico and La Nina threatening a more extreme winter chill in the north.
“How many times have we witnessed this price action unfold in the natural gas markets,” said Teri Viswanath, lead economist for power, energy and water at CoBank. “The run-up that occurs during the hottest days of the summer always begins to wane as the heat begins to diminish and physical inventory limits take on greater importance. This outsized stock build simply underscores the fact that supply-demand balances remain loose.”
The slump erased much of the gain posted last month amid speculation U.S. gas was finally reaching a turning point, helped by shale drillers curtailing output in response to weak oil prices. Some traders pointed to expectations of a frigid winter and the possibility of a much tighter supply-demand balance. That, so the thinking went, would finally help elevate prices out of their two-year slump. Gas for January 2021 delivery is trading at the biggest premium to the October 2020 contract on record.