Natural Gas Price Rises on Smaller-Than-Expected Inventory Build

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 36 billion cubic feet for the week ending September 2. Analysts were expecting a storage addition of around 40 billion cubic feet. The five-year average for the week is an injection of around 64 billion cubic feet, and last year’s storage addition for the week totaled 72 billion cubic feet. Natural gas inventories rose by 51 billion cubic feet in the week ending August 26.

Natural gas futures for October delivery traded up about 3.7% in advance of the EIA’s report, at around $2.77 per million BTUs, and traded near $2.78 after the data release. Natural gas closed at $2.68 per million BTUs on Wednesday, below a five-day high of $2.79 set last Thursday and Friday. The 52-week range for natural gas is $2.05 to $3.02. One year ago the price for a million BTUs was around $2.96.

Natural gas prices have trailed down following the Labor Day holiday, even though the EIA estimates that Gulf of Mexico shut-ins related to Hurricane Hermine lowered August production by about 5%. Overall U.S. production was still slightly higher for the month.

EIA also expects natural gas prices to rise in the second half of 2016 and on into 2017, driving demand for cheaper coal. The agency projects natural gas prices of near $4 per million BTUs by the end of 2017 and estimates that natural gas-fired power generation will drop from 34.5% of all U.S. generations this year to 33.3%. Coal-fired generation is expected to rise from 30.1% in 2016 to 31% in 2017.

Stockpiles remain about 6% above their levels of a year ago and nearly 10% above the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.437 trillion cubic feet, around 306 billion cubic feet above the five-year average of 3.131 trillion cubic feet and 196 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 3.241 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 0.3%, at $88.49 in a 52-week range of $71.55 to $95.55.

Chesapeake Energy Corp. (NYSE: CHK) traded up about 5.1% to $7.17. The stock’s 52-week range is $1.50 to $9.55.

EOG Resources Inc. (NYSE: EOG) traded up about 0.7% to $94.95. The 52-week range is $57.15 to $95.47. The high was posted Thursday morning.

Furthermore, the United States Natural Gas ETF (NYSEMKT: UNG) also traded up about 3.7%, at $8.18 in a 52-week range of $5.78 to $11.36.