Natural Gas Price Jumps on Low Storage Addition

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 111 billion cubic feet for the week ending May 1. Analysts expected a storage injection (increase) of around 125 billion cubic feet. The five-year average for the week is an increase of around 85 billion cubic feet.

Natural gas futures for June delivery traded down about 1.1% in advance of the EIA’s report, at around $2.90 per million BTUs, and jumped to around $3.02 (up about 4.1% for the day) following release of the report. Last Thursday, natural gas closed at $2.73 per million BTUs and natural gas futures have increased by about 6% over the past five trading days. The 52-week low for natural gas futures is $2.48. One year ago the price for a million BTUs was around $4.20.

Spring weather is bringing some stormy weather to the northern portion of the United States this week, and along with it cooler temperatures that are boosting demand (a little) for natural gas. The cooler weather is expected to make its way into Texas and other parts of the southern United States later this week and into next, reducing demand for cooling. Demand for natural gas is expected to remain low as a result.

The smaller-than-expected injection is almost certainly due to lower production in the major U.S. shale plays. The EIA said in its drilling productivity report released earlier this week that it expects natural gas production to drop by 112 million cubic feet per day in June

Stockpiles are about 65.7% above their levels of a year ago and about 2% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 1.897 trillion cubic feet, around 38 billion cubic feet below the five-year average of 1.935 trillion cubic feet and 752 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 1.145 trillion cubic feet for the same period a year ago.

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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 up about 0.6%, at $87.06 in a 52-week range of $82.68 to $104.76.

Chesapeake Energy Corp. (NYSE: CHK) traded up about 1.6% to $15.47, in a 52-week range of $13.38 to $29.92.

EOG Resources Inc. (NYSE: EOG) traded down about 0.1% to $91.52. The 52-week range is $81.07 to $118.89.

Furthermore, the United States Natural Gas ETF (NYSEMKT: UNG) traded up more than 2%, at $14.78 in a 52-week range of $12.28 to $26.42.