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Find Out How the Natural Gas Market Performed Last Week

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The U.S. Energy Department's weekly inventory release showed a higher-than-expected increase in natural gas supplies. The bearish inventory numbers, plus the prospect of tepid weather-related consumption due to comfortable temperatures meant that the U.S. benchmark lost 1.9% last week.

Let us see what the natural gas situation looks like after the U.S. Energy Department's latest weekly inventory release:

EIA Reports a Build Larger Than Market Expectations

Stockpiles held in underground storage in the lower 48 states rose by 71 billion cubic feet (Bcf) for the week ended May 14 compared to the guidance of a 67 Bcf addition per the analysts surveyed by S&P Global Platts. However, the increase was below last year’s addition of 84 Bcf for the same corresponding week and the five-year (2016-2020) average net build of 86 Bcf.

The latest injection puts total natural gas stocks at 2,100 billion cubic feet (Bcf), which is 391 Bcf (15.7%) below the 2020 levels at this time and 87 Bcf (4%) lower than the five-year average.

Total supply of natural gas averaged 96.4 Bcf per day, edging down 0.3% on a weekly basis due to lower shipments from Canada.

Meanwhile, daily consumption fell 9.4% to 80.6 Bcf from 89 Bcf in the previous week, dragged down by weaker heating demand from the residential/commercial sector, plus lower liquefied natural gas (LNG) exports associated with the planned maintenance, partly offset by a higher power burn.

Natural Gas Registers a Weekly Decline

Natural gas prices trended downward last week following the higher-than-expected inventory build. Futures for June delivery ended Friday at $2.91 per million British thermal units (MMBtu) on the New York Mercantile Exchange, falling 1.9% from the previous week’s closing. The decrease in the price of natural gas is also the result of mild weather predictions throughout most of the United States for the days ahead, which would translate into tepid demand for the fuel.

Wrap-Up

As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. The latest models are anticipating moderate temperature-driven consumption, after which prices have gone down.

With winter drawing to a close and the so-called “shoulder season” of typically low natural gas demand (ahead of the intense summer heat) currently in action, prices could face more downside risks than upside potential. While healthy LNG export and strong deliveries to Mexico amid flat production are providing some support to the prices, it will be weather conditions across the United States that will dictate the energy commodity’s future.

The lingering uncertainty over the 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) , Range Resources (RRC - Free Report) , Comstock Resources (CRK - Free Report) , Antero Resources (AR - Free Report) , Southwestern Energy Company (SWN - Free Report) , Cabot Oil & Gas Corporation (COG - Free Report) etc.

If you are still looking for near-term natural gas plays, SilverBow Resources (SBOW - Free Report) might be an excellent selection.

A pure-play upstream operator in the Eagle Ford Shale in South Texas, SilverBow Resources is a natural gas-focused exploration and production company. Over 30 days, the Zacks Rank #1 (Strong Buy) company has seen the Zacks Consensus Estimate for 2021 increase 21.5%. SilverBow controls 165,000 net acres in the Eagle Ford and around 80% of its total output comprises natural gas.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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