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Natural Gas Slips on Bigger-than-Expected Inventory Build
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The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies. This, together with predictions of tepid temperatures across the country in the near term – leading to the commodity’s weak demand for air conditioning – pushed natural gas futures to a 2-month low.
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: Larger-than-Expected Injection
Stockpiles held in underground storage in the lower 48 states rose by 29 billion cubic feet (Bcf) for the week ended Aug 5, 2016, above the guidance (of 25 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 build of 57 Bcf and the 5-year (2011–2015) average addition of 53 Bcf for the reported week.
Following past week’s rise, the current storage level – at 3.317 trillion cubic feet (Tcf) – is now up 361 Bcf (12%) from last year and is sitting 440 Bcf (15%) above the five-year average.
Natural Gas Prices Slump
Natural gas prices dived to their lowest level since mid-June following the bearish injection numbers. Things were further worsened by predictions of weak heating demand with forecasts of mild temperature across the country over the next few days. However, at just over $2.5 per MMBtu, the commodity is still up around 60% since hitting 17-year lows of around $1.6 per MMBtu in the first quarter.
What’s Next?
The run up notwithstanding, natural gas prices are way off the heights reached some years back. From a peak of about $13.50 per MMBtu in 2008 to around $2.5 now, the plummeting value of natural gas represents a decline of over 80% over 8 years.
But with this summer still likely to turn out hotter-than-normal, natural gas demand is expected to pick up on the back of elevated power sector consumption. Coupled with the easing production from the major shale plays, natural gas prices are set to rise.
What’s more, rig count has been falling consistently and is now languishing at 81 – compared to more than 210 a year ago and the high of 1,606 reached in 2008. Therefore, production growth is unlikely to resume anytime soon.
The price strength translates into upside for natural gas-weighted companies including the likes of Cimarex Energy Co. , EQT Corp. (EQT - Free Report) , Southwestern Energy Co. (SWN - Free Report) , Cabot Oil & Gas Corp. and Williams Companies Inc. (WMB - Free Report) .
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Natural Gas Slips on Bigger-than-Expected Inventory Build
The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies. This, together with predictions of tepid temperatures across the country in the near term – leading to the commodity’s weak demand for air conditioning – pushed natural gas futures to a 2-month low.
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: Larger-than-Expected Injection
Stockpiles held in underground storage in the lower 48 states rose by 29 billion cubic feet (Bcf) for the week ended Aug 5, 2016, above the guidance (of 25 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 build of 57 Bcf and the 5-year (2011–2015) average addition of 53 Bcf for the reported week.
Following past week’s rise, the current storage level – at 3.317 trillion cubic feet (Tcf) – is now up 361 Bcf (12%) from last year and is sitting 440 Bcf (15%) above the five-year average.
Natural Gas Prices Slump
Natural gas prices dived to their lowest level since mid-June following the bearish injection numbers. Things were further worsened by predictions of weak heating demand with forecasts of mild temperature across the country over the next few days. However, at just over $2.5 per MMBtu, the commodity is still up around 60% since hitting 17-year lows of around $1.6 per MMBtu in the first quarter.
What’s Next?
The run up notwithstanding, natural gas prices are way off the heights reached some years back. From a peak of about $13.50 per MMBtu in 2008 to around $2.5 now, the plummeting value of natural gas represents a decline of over 80% over 8 years.
But with this summer still likely to turn out hotter-than-normal, natural gas demand is expected to pick up on the back of elevated power sector consumption. Coupled with the easing production from the major shale plays, natural gas prices are set to rise.
What’s more, rig count has been falling consistently and is now languishing at 81 – compared to more than 210 a year ago and the high of 1,606 reached in 2008. Therefore, production growth is unlikely to resume anytime soon.
The price strength translates into upside for natural gas-weighted companies including the likes of Cimarex Energy Co. , EQT Corp. (EQT - Free Report) , Southwestern Energy Co. (SWN - Free Report) , Cabot Oil & Gas Corp. and Williams Companies Inc. (WMB - Free Report) .
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>