Natural-gas futures extended a pullback on Thursday from multiyear highs, a day after remarks by Russian President Vladimir Putin said Mosco would raise natural-gas supplies to Europe.
Oil prices, meanwhile, looked to recoup some of their recent losses in the wake of a larger-than-expected weekly rise in U.S. crude inventories.
More natural gas form Russia would “provide a relief” as current gas storage sites are just under 76% full, compared to a 10-year seasonal average of almost 90%, said Rohan Reddy, analyst at Global X, a provider of global exchange-traded funds.
However, “it is still unclear whether Russia will offer a significant amount of supplies to “solve the energy shortage issue,” he told MarketWatch, adding that Russia majority state-owned Gazprom has already exceeded its contractual obligations by more than 8% this year in Europe, and Europe still suffered from supply issues.
Supply is only part of the problem, said Reddy. “Increasing demand and competition for energy sources” are becoming an issue.
On Thursday, November natural gas fell 11.5 cents, or 2%, to $5.556 per million British thermal units on the New York Mercantile Exchange. Prices dropped 10.1% on Wednesday after ending Tuesday at its highest since December 2008.
Prices managed to pare some of their earlier losses after the Energy Information Administration on Thursday reported that domestic supplies of natural gas rose by 118 billion cubic feet for the week ended Oct. 1. That compared with an increase of 111 billion cubic feet forecast by analysts polled by S&P Global Platts.
Meanwhile, West Texas Intermediate crude for November delivery moved up by 39 cents, or 0.5%, to $77.82 a barrel. The U.S. benchmark fell 1.9% Wednesday, retreating from Tuesday’s close at a nearly seven-year high. WTI remains 1.3% higher for the week.
December Brent crude, the global benchmark, added 43 cents, or 0.5%, to $81.51 a barrel on ICE Futures Europe after Wednesday’s 1.8% decline.
The remarks by Putin, who said Russian gas sales could hit a record, had weighed on both natural gas and crude.
Europe is entering the winter heating season with very low natural-gas inventories, said Rob Thummel, portfolio manager at energy investment firm Tortoise. Asia, meanwhile, does not have a lot of natural-gas storage and is securing all energy supplies elsewhere, leading global commodity prices to rise, he said.
With elevated prices for natural gas, as well as coal, oil could be used as a substitute in certain regions, though Thummel emphasizes that “oil won’t be the savior” for the energy market because natural gas is the primary source of heating in the U.S., Europe and Asia.
Some analysts, however, believe the retreat in natural-gas prices may tone down expectations that gas-fired power plants, particularly in Asia, could switch to oil.
“Putin’s sudden willingness to play nice threatens to eliminate the fuel switching conversation that had become the latest hot topic in the energy market,” said Robert Yawger, director of energy futures at Mizuho Securities, in a note.
The chief executive of Saudi Aramco earlier this week had said the gas-to-oil shift would add 500,000 barrels a day of demand to the oil market, he noted.
Also Wednesday, the EIA reported that U.S. crude inventories rose by 2.3 million barrels for the week ended Oct. 1, marking a second straight weekly climb.
And U.S. Energy Secretary Jennifer Granholm raised the possibility of a release of oil from the government’s Strategic Petroleum Reserve to help calm the surge in gasoline prices, the Financial Times reported on Wednesday. She told the FT Energy Transition Strategies Summit that she is not ruling out a ban on crude-oil exports.
According to some reports on Thursday, however, the Energy Department walked back those comments and said it has no plays to tap the SPR.
Rounding out action on Nymex, November gasoline edged up by 0.3% to $2.315 a gallon, but November heating oil lost 0.2% to $2.437 a gallon.