Energy Economy

Natural Gas Price Declines Again as Inventories Swell

Blue flames of gas stove
Source: Thinkstock
The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 111 billion cubic feet for the week ending February 13. Estimates called for a drawdown of 105 billion to 109 billion cubic feet. The five-year average draw is about 180 billion cubic feet, and during the same period last year the draw was 250 billion cubic feet.

Natural gas futures for March delivery traded up less than 1% in advance of the EIA’s report, at around $2.85 per million BTUs, and dropped to about $2.80 immediately following the report. Natural gas futures have slipped slightly from around $2.87 per million BTUs since last week. The 52-week low for natural gas futures is $2.57. One year ago, the price for a million BTUs was around $4.90.

Demand for heating picked up at the end of last week and has continued into this week as cold temperatures settled in over the eastern United States. Colder temperatures also worked their way down into the Southeast and Florida, which should increase demand as well. Temperatures west of the Mississippi have remained unseasonably warm, cutting demand from that part of the country.

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Stockpiles are about 45.8% above their levels of a year ago and about 2.8% above the five-year average. Continuing milder weather so far this year has curtailed stockpile drawdowns, compared with last year’s much colder weather.

The weekly drop in inventories was slightly larger than analysts had forecast, but the amount of natural gas in storage actually increased both over last year and over the five-year average. That is not a good signal for prices.

The EIA reported that U.S. working stocks of natural gas totaled 2.16 trillion cubic feet, about 58 billion cubic feet above the five-year average of 2.10 trillion cubic feet and 678 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 1.48 trillion cubic feet for the same period a year ago.

Here is how stocks of the largest U.S. natural gas producers reacted to the latest report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded down about 1.4%, at $89.75 in a 52-week range of $86.03 to $104.76.

Chesapeake Energy Corp. (NYSE: CHK) traded down about 2.5%, at $20.23 in a 52-week range of $16.41 to $29.92.

EOG Resources Inc. (NYSE: EOG) traded down about 3.2% to $91.72. The 52-week range is $81.07 to $118.89.

In addition, the United States Natural Gas ETF (NYSEMKT: UNG) traded down about 0.3%, at $14.35 in a 52-week range of $13.12 to $27.89.

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