The U.S. Energy Department's weekly inventory release showed the season’s first triple-digit withdrawal from natural gas storage. While the draw was not as big as expected, favorable weather predictions and record liquefied natural gas (“LNG”) feedgas deliveries meant that the U.S. benchmark finished the week up more than 4%.
Let us see how the natural gas situation looks like after the U.S. Energy Department's latest weekly inventory release
EIA Reports a Withdrawal Lower Than Market Expectations
Stockpiles held in underground storage in the lower 48 states fell by 122 billion cubic feet (Bcf) for the week ended Dec 11 compared to the guidance (of a 127 Bcf decline). However, the decrease was above the five-year (2015-2019) average net shrinkage of 105 Bcf and last year’s drop of 97 Bcf for the reported week.
The latest official data puts total natural gas stocks at 3.726 trillion cubic feet (Tcf) — 284 Bcf (8.3%) above the 2019 levels at this time and 243 Bcf (7%) higher than the five-year average.
Total supply of natural gas averaged 95.7 Bcf per day, essentially unchanged on a weekly basis as higher dry production was offset by lower shipments from Canada.
Daily consumption — at 112.2 Bcf — remained flat too, with an increase in residential/commercial gas usage offset by a dip in power demand.
Natural Gas Price Gains Despite the Below-Consensus Inventory Pull
Natural gas prices rose last week despite the lower-than-expected inventory draw. Futures for January delivery ended Friday at $2.70 per MMBtu on the New York Mercantile Exchange, up 4.2% from the same time previous week. The increase in the price of natural gas (despite the smaller-than-anticipated inventory draw) is the result of the ongoing strength in LNG demand and forecast models, indicating severe cold in the Christmas week, which translates into larger draws due to increased use of heaters.
Wrap Up
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With the latest models showing bullish changes toward a chiller outlook, prices are expected to trend higher. But with stockpiles still bloated, downside risks would continue to outweigh the upside potential unless the weather pattern flips significantly to colder for natural gas usage to rise. While growing LNG exports and lower production are providing some support for a price recovery, it will be the magnitude of the cold across the United States that will dictate the energy commodity’s future.
The lingering uncertainty over the heating fuel means that most natural gas-focused companies carry a Zacks Rank #3 (Hold). As a result, investors should preferably wait for a better entry point before buying shares in EQT Corporation (EQT - Free Report) , SilverBow Resources (SBOW - Free Report) , Cabot Oil & Gas Corporation , CNX Resources (CNX - Free Report) , Southwestern Energy Company (SWN - Free Report) etc. Others like Comstock Resources (CRK - Free Report) and Range Resources (RRC - Free Report) are further down the pecking order, with a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The U.S. Energy Department's weekly inventory release showed the season’s first triple-digit withdrawal from natural gas storage. While the draw was not as big as expected, favorable weather predictions and record liquefied natural gas (“LNG”) feedgas deliveries meant that the U.S. benchmark finished the week up more than 4%.
Let us see how the natural gas situation looks like after the U.S. Energy Department's latest weekly inventory release
EIA Reports a Withdrawal Lower Than Market Expectations
Stockpiles held in underground storage in the lower 48 states fell by 122 billion cubic feet (Bcf) for the week ended Dec 11 compared to the guidance (of a 127 Bcf decline). However, the decrease was above the five-year (2015-2019) average net shrinkage of 105 Bcf and last year’s drop of 97 Bcf for the reported week.
The latest official data puts total natural gas stocks at 3.726 trillion cubic feet (Tcf) — 284 Bcf (8.3%) above the 2019 levels at this time and 243 Bcf (7%) higher than the five-year average.
Total supply of natural gas averaged 95.7 Bcf per day, essentially unchanged on a weekly basis as higher dry production was offset by lower shipments from Canada.
Daily consumption — at 112.2 Bcf — remained flat too, with an increase in residential/commercial gas usage offset by a dip in power demand.
Natural Gas Price Gains Despite the Below-Consensus Inventory Pull
Natural gas prices rose last week despite the lower-than-expected inventory draw. Futures for January delivery ended Friday at $2.70 per MMBtu on the New York Mercantile Exchange, up 4.2% from the same time previous week. The increase in the price of natural gas (despite the smaller-than-anticipated inventory draw) is the result of the ongoing strength in LNG demand and forecast models, indicating severe cold in the Christmas week, which translates into larger draws due to increased use of heaters.
Wrap Up
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With the latest models showing bullish changes toward a chiller outlook, prices are expected to trend higher. But with stockpiles still bloated, downside risks would continue to outweigh the upside potential unless the weather pattern flips significantly to colder for natural gas usage to rise. While growing LNG exports and lower production are providing some support for a price recovery, it will be the magnitude of the cold across the United States that will dictate the energy commodity’s future.
The lingering uncertainty over the heating fuel means that most natural gas-focused companies carry a Zacks Rank #3 (Hold). As a result, investors should preferably wait for a better entry point before buying shares in EQT Corporation (EQT - Free Report) , SilverBow Resources (SBOW - Free Report) , Cabot Oil & Gas Corporation , CNX Resources (CNX - Free Report) , Southwestern Energy Company (SWN - Free Report) etc. Others like Comstock Resources (CRK - Free Report) and Range Resources (RRC - Free Report) are further down the pecking order, with a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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