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Natural Gas Supply Glut Narrows on Below-Average Build
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The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies, However, the build was well below historical averages that helped the commodity shave off its surplus to the 5-year average.
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: A Larger-than-Expected Rise in Storage
Stockpiles held in underground storage in the lower 48 states rose by 61 billion cubic feet (Bcf) for the week ended June 16, 2017, above the guidance (of 58 Bcf gain) as per the analysts surveyed by S&P Global Platts, a leading independent commodities and energy data provider.
However, the increase was lower than both last year’s addition of 63 Bcf and the 5-year (2012-2016) average net injection of 82 Bcf for the reported week. This helped the current storage level – at 2.770 trillion cubic feet (Tcf) – narrow its surplus to the five-year average to 207 Bcf (8.1%), while stocks are 324 Bcf (10.5%) lower than the year-ago figure.
Positive Long-Term Thesis
As of now, the demand situation looks promising with hot conditions prevailing in certain U.S. pockets and power generators burning more gas to meet intensifying cooling demand.
In any case, long-term fundamentals for the commodity continue to be supportive 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.
Over the summer, these secular tailwinds are likely to have a positive impact on natural gas sentiment and price.
The perceived price strength augurs well for natural gas-heavy upstream companies like Range Resources Corp. (RRC - Free Report) , Rice Energy Inc. , Chesapeake Energy Corp. (CHK - Free Report) , Southwestern Energy Co. (SWN - Free Report) , WPX Energy Inc. , Cabot Oil & Gas Corp. and EQT Corp. (EQT - Free Report) .
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Natural Gas Supply Glut Narrows on Below-Average Build
The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies, However, the build was well below historical averages that helped the commodity shave off its surplus to the 5-year average.
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: A Larger-than-Expected Rise in Storage
Stockpiles held in underground storage in the lower 48 states rose by 61 billion cubic feet (Bcf) for the week ended June 16, 2017, above the guidance (of 58 Bcf gain) as per the analysts surveyed by S&P Global Platts, a leading independent commodities and energy data provider.
However, the increase was lower than both last year’s addition of 63 Bcf and the 5-year (2012-2016) average net injection of 82 Bcf for the reported week. This helped the current storage level – at 2.770 trillion cubic feet (Tcf) – narrow its surplus to the five-year average to 207 Bcf (8.1%), while stocks are 324 Bcf (10.5%) lower than the year-ago figure.
Positive Long-Term Thesis
As of now, the demand situation looks promising with hot conditions prevailing in certain U.S. pockets and power generators burning more gas to meet intensifying cooling demand.
In any case, long-term fundamentals for the commodity continue to be supportive 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.
Over the summer, these secular tailwinds are likely to have a positive impact on natural gas sentiment and price.
The perceived price strength augurs well for natural gas-heavy upstream companies like Range Resources Corp. (RRC - Free Report) , Rice Energy Inc. , Chesapeake Energy Corp. (CHK - Free Report) , Southwestern Energy Co. (SWN - Free Report) , WPX Energy Inc. , Cabot Oil & Gas Corp. and EQT Corp. (EQT - Free Report) .
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>