Natural Gas Price Ticks Up on Smaller Inventory Addition

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 22 billion cubic feet for the week ending August 12. Analysts surveyed by Reuters were expecting a storage addition of between 24 billion and 35 billion cubic feet.

The five-year average for the week is an injection of around 57 billion cubic feet, and last year’s storage addition for the week totaled 52 billion cubic feet. Natural gas inventories rose by 29 billion cubic feet in the week ending August 5.

Natural gas futures for September delivery traded down less than 0.1% in advance of the EIA’s report, at around $2.63 per million BTUs, and traded near $2.65 after the data release. Natural gas closed at $2.62 per million BTUs on Wednesday, after dropping from five-day high of $2.83 last Thursday. The 52-week range for natural gas is $2.01 to $3.01. One year ago, the price for a million BTUs was around $3.03.

Earlier this week, the EIA projected that global natural gas production will rise from an estimated 342 billion cubic feet per day in 2015 to 554 billion cubic feet per day in 2040. That’s an increase of 62%. The portion of production attributed to shale resources is projected to rise from 42 billion cubic feet per day to 168 billion cubic feet per day, a jump of 400%. Some 70% of that production will come from just six countries: the United States, Canada, China, Argentina, Mexico and Algeria.

U.S. shale gas production will more than double from 37 billion cubic feet per day to 79 billion cubic feet per day. As a percentage of global shale gas production, by 2040 the United States will be producing about 47% of all the world’s shale gas. Today U.S. shale gas production accounts for about 88% of global shale production.

One other item of note from the EIA: by the end of this year carbon dioxide emissions from natural gas burning will surpass emissions generated by burning coal. A combination of more natural gas-fired electricity generation and less coal-fired generation led the EIA to project that carbon dioxide emissions from natural gas burning will be 10% greater than coal emissions.

Stockpiles remain about 11% above their levels of a year ago and about 14% above the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.339 trillion cubic feet, around 405 billion cubic feet above the five-year average of 2.934 trillion cubic feet and 327 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 3.012 trillion cubic feet for the same period a year ago.

Here’s how share prices of the largest U.S. natural gas producers reacting to this latest report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded up about 0.2%, at $88.30 in a 52-week range of $66.55 to $95.55.

Chesapeake Energy Corp. (NYSE: CHK) traded up about 6% to $6.02. The stock’s 52-week range is $1.50 to $9.55. The company’s shares tumbled Wednesday on an upsized refinancing deal.

EOG Resources Inc. (NYSE: EOG) traded up about 0.3% to $90.51. The 52-week range is $57.15 to $92.00.

Furthermore, the United States Natural Gas ETF (NYSEMKT: UNG) also traded up about 1.1%, at $7.91 in a 52-week range of $5.78 to $12.83.