Brent Jumps 4.36%, WTI Up Over 1% as US Natgas Futures Slide 2.04% on Abundant Supply

Key moments

Oil Rallies While Natgas Suffers Over 2% Drop

Wednesday’s energy markets witnessed a stark divergence in price movements, with US natural gas futures experiencing a significant downturn while crude oil benchmarks rallied. Natural gas futures witnessed a decline exceeding 2%, erasing Tuesday’s modest gains of 0.12%.

Several key factors contributed to the downward pressure on natural gas prices. A primary driver was the near-record levels of natural gas production in the United States. Data provided by LSEG showed that in April, gas output across most states set a new record of 106.3 billion. This abundance of supply created a bearish sentiment in the market.

Adding to the downward momentum, the daily flow of natural gas to liquefied natural gas (LNG) export facilities has decreased, with Wednesday’s figures reaching a one-week low of 16.1 bcfd. This reduction in demand for export, even if temporary, further contributed to the negative price action in the natural gas futures market.

Contrasting sharply with the decline in natural gas futures was the robust performance of the crude oil market. Brent crude futures experienced a substantial jump of 4.36%, indicating strong buying interest and a significant increase in its value. Similarly, West Texas Intermediate (WTI) crude oil futures also climbed, registering a notable gain of 1.53%.

This divergence highlighted the distinct market dynamics currently influencing the two energy commodities. While natural gas prices were pressured by supply and short-term demand factors, crude oil appeared to be responding to optimism surrounding potential discussions between the US and China US-China, along with reports of production cuts from some oil-producing nations.

Despite the current high levels of natgas production, some analysts suggested that future oil drilling activity could potentially influence natural gas prices. If Wednesday’s momentum wanes and oil futures once again begin tumbling, this could force energy firms to cut back on oil drilling in the Permian and Bakken shale basins. Since natural gas is often a byproduct of oil extraction in these regions, a reduction in oil drilling could subsequently lead to lower natural gas output, potentially providing some upward support to gas prices in the coming weeks.