Natural Gas Price Hampered by Expected Inventory Drawdown

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 20 billion cubic feet for the week ending July 28. Analysts were expecting a storage injection of between 17 billion and 27 billion cubic feet. The five-year average for the week is an injection of 44 billion cubic feet, and last year’s storage withdrawal for the week totaled 6 billion cubic feet. Natural gas inventories rose by 17 billion cubic feet in the week ending July 21.

Natural gas futures for September delivery traded up about 0.8% in advance of the EIA’s report, at around $2.83 per million BTUs and ticked higher to around $2.85 shortly thereafter. The highest close for the past five trading days was registered last Thursday at $2.97. The 52-week range for natural gas is $2.76 to $3.60. One year ago the price for a million BTUs was around $3.09.

Domestic demand for natural gas in the week ahead is expected to fall into the moderate range, ending high demand streak we’ve seen for the past three weeks. Cooler air is due for the Midwest today, then moving east and south to keep temperatures down through the beginning of next week.

Stockpiles fell week over week to 8.5% below last year’s level, but they remain 3% above the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.010 trillion cubic feet, around 87 billion cubic feet above the five-year average of 2.923 trillion cubic feet and 279 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.289 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 0.1%, at $80.68 in a 52-week range of $78.27 to $93.22.

Chesapeake Energy Corp. (NYSE: CHK) traded down about 1.7% to $4.53. The stock’s 52-week range is $4.38 to $8.20. The company reported second-quarter earnings this morning.

EOG Resources Inc. (NYSE: EOG) traded down 2.1% to $90.39. The 52-week range is $81.60 to $109.37.

In addition, the United States Natural Gas ETF (NYSEMKT: UNG) traded up about 0.6%, at $6.34 in a 52-week range of $6.20 to $9.74.