We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
EIA Reports Below-Average Natural Gas Draw on Mild Weather
Read MoreHide Full Article
The U.S. Energy Department's weekly inventory release showed a larger-than-expected decrease in natural gas supplies though the withdrawal was way below average as mild weather conditions restricted heating demand.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays.
Analysis of the Data: Below-Average Draw
Stockpiles held in underground storage in the lower 48 states fell by 87 billion cubic feet (Bcf) for the week ended Jan 27, 2017, above the guidance (of 83 Bcf draw) as per the analysts surveyed by S&P Global Platts, a leading independent commodities and energy data provider. The past week’s decline represents the eleventh successive withdrawal of the 2016-2017 winter heating season after stocks hit an all-time high in November.
Following the latest withdrawal, the current storage level – at 2.711 trillion cubic feet (Tcf) – is down 266 Bcf (8.9%) from last year and 59 Bcf (2.2%) below the five-year average.
However, a bout of unseasonably mild weather meant that the decrease lagged both last year’s drop of 169 Bcf and the 5-year (2012–2016) average shrinkage of 166 Bcf for the reported week.
Spooked by the bearish relative inventory draw, natural gas prices traded down around 9% for the week to end Friday at $3.063 per MMBtu.
Unfavorable Weather Outlook Delays Positive Long-Term Thesis
Heating demand in winter season – which runs from Nov 1 to Mar 31 – is the single most important contributor of natural gas consumption during these months. Therefore, with the latest weather update pointing to the lack of any cold blast over the next 10-15 days, Feb heating degree days (HDD) will likely fall below average and limit storage draws. Following this bearish weather outlook, natural gas prices have come under pressure and dropped to multi-month lows recently.
However, long-term fundamentals for the commodity continue to be bullish on the back of structural imbalances. While domestic natural gas production is expected to rebound this year, the growing use of liquefied natural gas (or LNG), booming exports to Mexico, replacing coal-fired power plants and higher demand from industrial projects will likely take care of the increased output. The resulting effect will ensure natural gas storage keeping pace with the 5-year average in the near future, with deficits piling up later on.
By the onset of summer months, these secular headwinds will start to have a positive impact on natural gas sentiment and price.
The perceived price strength augurs well for natural gas drillers like Rice Energy Inc. , Chesapeake Energy Corp. (CHK - Free Report) , Southwestern Energy Co. (SWN - Free Report) , Antero Resources Corp. (AR - Free Report) , Cabot Oil & Gas Corp. and EQT Corp. (EQT - Free Report) .
However, each of these firms has a Zacks Rank #3 (Hold), which does not make them screaming buys.
Headquartered in Fort Worth, TX, Range Resources is an independent energy company, engaged in the exploration, development and acquisition of oil and gas properties primarily in the southwestern, Appalachian and Gulf Coast regions of the U.S. The 2016 Zacks Consensus Estimate for this company is -$1.79, representing a healthy 58% reduction in loss over 2015. This year’s average forecast is for a profit of 68 cents, pointing to 138% growth.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
EIA Reports Below-Average Natural Gas Draw on Mild Weather
The U.S. Energy Department's weekly inventory release showed a larger-than-expected decrease in natural gas supplies though the withdrawal was way below average as mild weather conditions restricted heating demand.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays.
Analysis of the Data: Below-Average Draw
Stockpiles held in underground storage in the lower 48 states fell by 87 billion cubic feet (Bcf) for the week ended Jan 27, 2017, above the guidance (of 83 Bcf draw) as per the analysts surveyed by S&P Global Platts, a leading independent commodities and energy data provider. The past week’s decline represents the eleventh successive withdrawal of the 2016-2017 winter heating season after stocks hit an all-time high in November.
Following the latest withdrawal, the current storage level – at 2.711 trillion cubic feet (Tcf) – is down 266 Bcf (8.9%) from last year and 59 Bcf (2.2%) below the five-year average.
However, a bout of unseasonably mild weather meant that the decrease lagged both last year’s drop of 169 Bcf and the 5-year (2012–2016) average shrinkage of 166 Bcf for the reported week.
Spooked by the bearish relative inventory draw, natural gas prices traded down around 9% for the week to end Friday at $3.063 per MMBtu.
Unfavorable Weather Outlook Delays Positive Long-Term Thesis
Heating demand in winter season – which runs from Nov 1 to Mar 31 – is the single most important contributor of natural gas consumption during these months. Therefore, with the latest weather update pointing to the lack of any cold blast over the next 10-15 days, Feb heating degree days (HDD) will likely fall below average and limit storage draws. Following this bearish weather outlook, natural gas prices have come under pressure and dropped to multi-month lows recently.
However, long-term fundamentals for the commodity continue to be bullish on the back of structural imbalances. While domestic natural gas production is expected to rebound this year, the growing use of liquefied natural gas (or LNG), booming exports to Mexico, replacing coal-fired power plants and higher demand from industrial projects will likely take care of the increased output. The resulting effect will ensure natural gas storage keeping pace with the 5-year average in the near future, with deficits piling up later on.
By the onset of summer months, these secular headwinds will start to have a positive impact on natural gas sentiment and price.
The perceived price strength augurs well for natural gas drillers like Rice Energy Inc. , Chesapeake Energy Corp. (CHK - Free Report) , Southwestern Energy Co. (SWN - Free Report) , Antero Resources Corp. (AR - Free Report) , Cabot Oil & Gas Corp. and EQT Corp. (EQT - Free Report) .
However, each of these firms has a Zacks Rank #3 (Hold), which does not make them screaming buys.
In case you are looking for natural gas names for your portfolio, one could opt for Range Resources Corp. (RRC - Free Report) . It has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Fort Worth, TX, Range Resources is an independent energy company, engaged in the exploration, development and acquisition of oil and gas properties primarily in the southwestern, Appalachian and Gulf Coast regions of the U.S. The 2016 Zacks Consensus Estimate for this company is -$1.79, representing a healthy 58% reduction in loss over 2015. This year’s average forecast is for a profit of 68 cents, pointing to 138% growth.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>