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The U.S. Energy Department's weekly release showed a higher-than-expected increase in natural gas supplies. Despite the bearish inventory numbers, the low stockpile levels and consistent liquefied natural gas (“LNG”) feedgas deliveries mean that the fuel’s prices will remain favorable in the short and medium term.
EIA Reports a Build Bigger Than Market Expectations
Stockpiles held in underground storage in the lower 48 states rose by 49 billion cubic feet (Bcf) for the week ended Aug 6 compared to the guidance of a 44 Bcf addition per the analysts surveyed by S&P Global Platts. The increase was also above the five-year (2016-2020) average net build of 42 Bcf but came below last year’s addition of 55 Bcf for the same corresponding week.
The latest injection puts total natural gas stocks at 2,776 billion cubic feet (Bcf), which is 548 Bcf (16.5%) below the 2020 level at this time and 178 Bcf (6%) lower than the five-year average.
Total supply of natural gas averaged 97.9 Bcf per day, edging down 0.3% on a weekly basis due to a slight decrease in dry production and lower shipments from Canada.
Meanwhile, daily consumption rose 1.2% to 90.6 Bcf from 89.5 Bcf in the previous week, primarily due to a higher power burn (or cooling usage) and stronger demand from the residential/commercial sector, partly offset by deceased LNG deliveries.
Natural Gas Registers a Weekly Decline
Natural gas prices trended downward last week following the higher-than-expected inventory build. Futures for September delivery ended Friday at $3.86 per million British thermal units (MMBtu) on the New York Mercantile Exchange, falling 6.7% from the previous week’s closing. The decrease in the price of natural gas is also the result of subdued cooling demand with peak summer drawing to a close. Besides, declines in LNG feedgas consumption in the export facilities played spoilsport.
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. Nevertheless, the commodity’s medium-term outlook continues to be favorable. For starters, the low stockpile levels — well below normal for this time of the year — have been supporting the price of the energy commodity with the apprehension that the market might enter the winter withdrawal season with supply shortage. Secondly, despite the odd hiccup, LNG export is likely to stay healthy for the foreseeable future, providing a further boost to U.S. natural gas futures. Consequently, the scenario for the primary U.S. power plant fuel is expected to be healthy. In fact, natural gas broke the $4 threshold late last month and recently jumped to its highest since December 2018.
Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. This should aid gas-weighted producers like Southwestern Energy Company (SWN - Free Report) , Cabot Oil & Gas Corporation and Range Resources Corporation (RRC - Free Report) . Southwestern Energy and Cabot sport a Zacks Rank #1 (Strong Buy), while Range Resources carries a Zacks Rank #2 (Buy).
Southwestern Energy churns out in excess of 1 trillion cubic feet equivalent annually, 80% of which is natural gas. It focuses on growth through a combination of acquisitions and active drilling. Last year, Southwestern bought Montage Resources, which boosted its Appalachian Basin footprint with the high-return Marcellus and Utica assets. In June, the company agreed to purchase private natural gas producer Indigo Natural Resources to further expand its reach in the Haynesville and Bossier shale plays of northern Louisiana. Over 30 days, this natural gas powerhouse has seen the Zacks Consensus Estimate for 2021 increase 7.5%.
Cabot is an independent gas exploration company with producing properties mainly in the continental United States. The company owns around 175,000 net acres in the dry gas window of the Marcellus play. Cabot boasts of one of the strongest balance sheets among the natural gas-focused E&P group. The company's total assets are almost double that of its total liabilities, reflecting safety regarding debt payments, robust financing power and the ability to increase stock repurchases. Over 30 days, this 100% natural gas producer has seen the Zacks Consensus Estimate for 2021 increase 21%. Investors should know that Cabot recently raised its quarterly dividend by 10% for its sixth hike since May 2017.
Range Resources — among the top 10 natural gas producers in the United States — has a strong footing in the prolific Appalachian Basin. In the gas-rich resource, the upstream firm has huge inventories of low-risk drilling sites that are likely to provide production for several decades. Over 30 days, Range Resources has seen the Zacks Consensus Estimate for 2021 increase 20.5%. Natural gas contributed 68.9% to the company’s latest quarterly production.
For natural gas operators like Comstock Resources (CRK - Free Report) , Antero Resources (AR - Free Report) and EQT Corporation (EQT - Free Report) , investors should preferably wait for a better entry point before buying their shares. All the companies carry a Zacks Rank #3 (Hold).
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Natural Gas: Upside Potential Outweighs Bearish EIA Report
The U.S. Energy Department's weekly release showed a higher-than-expected increase in natural gas supplies. Despite the bearish inventory numbers, the low stockpile levels and consistent liquefied natural gas (“LNG”) feedgas deliveries mean that the fuel’s prices will remain favorable in the short and medium term.
EIA Reports a Build Bigger Than Market Expectations
Stockpiles held in underground storage in the lower 48 states rose by 49 billion cubic feet (Bcf) for the week ended Aug 6 compared to the guidance of a 44 Bcf addition per the analysts surveyed by S&P Global Platts. The increase was also above the five-year (2016-2020) average net build of 42 Bcf but came below last year’s addition of 55 Bcf for the same corresponding week.
The latest injection puts total natural gas stocks at 2,776 billion cubic feet (Bcf), which is 548 Bcf (16.5%) below the 2020 level at this time and 178 Bcf (6%) lower than the five-year average.
Total supply of natural gas averaged 97.9 Bcf per day, edging down 0.3% on a weekly basis due to a slight decrease in dry production and lower shipments from Canada.
Meanwhile, daily consumption rose 1.2% to 90.6 Bcf from 89.5 Bcf in the previous week, primarily due to a higher power burn (or cooling usage) and stronger demand from the residential/commercial sector, partly offset by deceased LNG deliveries.
Natural Gas Registers a Weekly Decline
Natural gas prices trended downward last week following the higher-than-expected inventory build. Futures for September delivery ended Friday at $3.86 per million British thermal units (MMBtu) on the New York Mercantile Exchange, falling 6.7% from the previous week’s closing. The decrease in the price of natural gas is also the result of subdued cooling demand with peak summer drawing to a close. Besides, declines in LNG feedgas consumption in the export facilities played spoilsport.
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. Nevertheless, the commodity’s medium-term outlook continues to be favorable.
For starters, the low stockpile levels — well below normal for this time of the year — have been supporting the price of the energy commodity with the apprehension that the market might enter the winter withdrawal season with supply shortage. Secondly, despite the odd hiccup, LNG export is likely to stay healthy for the foreseeable future, providing a further boost to U.S. natural gas futures. Consequently, the scenario for the primary U.S. power plant fuel is expected to be healthy. In fact, natural gas broke the $4 threshold late last month and recently jumped to its highest since December 2018.
Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. This should aid gas-weighted producers like Southwestern Energy Company (SWN - Free Report) , Cabot Oil & Gas Corporation and Range Resources Corporation (RRC - Free Report) . Southwestern Energy and Cabot sport a Zacks Rank #1 (Strong Buy), while Range Resources carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Southwestern Energy churns out in excess of 1 trillion cubic feet equivalent annually, 80% of which is natural gas. It focuses on growth through a combination of acquisitions and active drilling. Last year, Southwestern bought Montage Resources, which boosted its Appalachian Basin footprint with the high-return Marcellus and Utica assets. In June, the company agreed to purchase private natural gas producer Indigo Natural Resources to further expand its reach in the Haynesville and Bossier shale plays of northern Louisiana. Over 30 days, this natural gas powerhouse has seen the Zacks Consensus Estimate for 2021 increase 7.5%.
Cabot is an independent gas exploration company with producing properties mainly in the continental United States. The company owns around 175,000 net acres in the dry gas window of the Marcellus play. Cabot boasts of one of the strongest balance sheets among the natural gas-focused E&P group. The company's total assets are almost double that of its total liabilities, reflecting safety regarding debt payments, robust financing power and the ability to increase stock repurchases. Over 30 days, this 100% natural gas producer has seen the Zacks Consensus Estimate for 2021 increase 21%. Investors should know that Cabot recently raised its quarterly dividend by 10% for its sixth hike since May 2017.
Range Resources — among the top 10 natural gas producers in the United States — has a strong footing in the prolific Appalachian Basin. In the gas-rich resource, the upstream firm has huge inventories of low-risk drilling sites that are likely to provide production for several decades. Over 30 days, Range Resources has seen the Zacks Consensus Estimate for 2021 increase 20.5%. Natural gas contributed 68.9% to the company’s latest quarterly production.
For natural gas operators like Comstock Resources (CRK - Free Report) , Antero Resources (AR - Free Report) and EQT Corporation (EQT - Free Report) , investors should preferably wait for a better entry point before buying their shares. All the companies carry a Zacks Rank #3 (Hold).