Natural Gas Price Wobbles Following Massive Inventory Drawdown

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 237 billion cubic feet for the week ending December 23. Analysts were expecting a storage decline of between 220 billion and 230 billion cubic feet. The five-year average for the week is a withdrawal of around 80 billion cubic feet, and last year’s storage decline for the week totaled 58 billion cubic feet. Natural gas inventories fell by 209 billion cubic feet in the week ending December 16.

Natural gas futures for February delivery traded down by around 2% in advance of the EIA’s report, at around $3.82 per million BTUs, and traded around $3.84 immediately after the data release. Natural gas closed at $3.90 per million BTUs on Wednesday, a five-day and 52-week high. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.86.

Demand for natural gas was nearly four times higher last week than in the same period a week ago and nearly three times higher than the five-year average. In case you’re wondering, yes, it’s really cold out there.

For the coming week, demand is expected to be moderate for the first part of the week as temperatures warm up along the East Coast and in the central and southeastern parts of the country. But another Arctic blast is expected to hit the northwest and northern Plains early next week, sending temperatures plunging again as the weather system moves east. Frigid weather is expected to drive demand very high by the end of next week.

Stockpiles have now dropped to 10.9% below their levels of a year ago and 2.3% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.360 trillion cubic feet, around 79 billion cubic feet below the five-year average of 3.439 trillion cubic feet and 413 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.773 trillion cubic feet for the same period a year ago.

Here’s how share prices of the largest U.S. natural gas producers reacted to today’s report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded up about 0.2%, at $90.46 in a 52-week range of $71.55 to $95.55.

Chesapeake Energy Corp. (NYSE: CHK) traded up about 0.3% to $7.25. The stock’s 52-week range is $1.50 to $8.20.

EOG Resources Inc. (NYSE: EOG) traded down about 0.6% to $101.03. The 52-week range is $57.15 to $109.37.

Moreover, the United States Natural Gas ETF (NYSEMKT: UNG) traded down about 0.2%, at $9.61 in a 52-week range of $5.78 to $9.74.