Natural gas leads commodity gainers in November
NATURAL GAS WAS BEST performing commodity in November, defying overall losses in the energy sector that saw crudeoil prices drop by more than 20 percent for the month.
An increase in natural-gas prices isn’t all that surprising given that demand for the heating fuel tends to increase as temperatures drop toward the end of the year, but the climb in natural gas was impressive, with futures prices climbing by roughly 38 percent month to date as of Friday, intraday.
Total U.S. supplies of natural gas in storage also stand at 3.054 trillion cubic feet as of the week ended Nov. 23, down about 19 percent from the five-year average.
Against that backdrop, futures prices for the commodity settled at $4.837 per million British thermal units on Nov. 14, the highest finish for a front-month contract since Feb. 26, 2014.
The next trading day, however, prices saw their biggest one-day percentage loss in more than 15 years.
U.S. natural-gas tight supplies have been tight, but production is at or near record highs, according to Will Rhind, chief executive officer of exchange-traded fund issuer GraniteShares. “Provided there is no hiccup in U.S. natural-gas production, inventory levels will likely rise as winter fades into spring, possibly pushing natural-gas prices lower.
All the while, prices for both U.S. and global benchmark crude oil have fallen by more than 20 percent this month, both have the potential to move up in the weeks and months ahead.
Rhind attributed the decline to record production in the U.S., Saudi Arabia and Russia, U.S. waivers for eight countries on Iran sanctions and concerns of weaker global economic growth which diminished oil demand expectations. U.S. crude supplies have also climbed for 10 weeks in a row.
“But it seems likely Saudi Arabia will not repeat mistakes made in 2014-2016, where it kept production high to maintain market share while driving oil prices to extremely low levels,” said Rhind.
Overall, however, the commodities sector declined in November.
Among other big commodity movers in the month of November, supply concerns contributed to a more than 15 percent rise in lean hog prices and a nearly 8 percent climb for palladium.
Meanwhile, palladium, which is used in catalytic
converters for gasoline engines, saw strong automobile manufacturers’ demand, with futures hitting a record settlement of $1,154.60 an ounce on Nov. 16.