Natural Gas Price Drops on Storage Increase, Weather Forecast

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stockpiles increased by 33 billion cubic feet for the week ending August 10.

Analysts were expecting a storage injection of around 29 billion cubic feet. The five-year average for the week is an injection of 56 billion cubic feet, and last year’s storage increase for the week totaled 49 billion cubic feet. Natural gas inventories rose by 43 billion cubic feet in the week ending August 3.

Natural gas futures for September delivery traded down about a penny in advance of the EIA’s report, at around $2.93 per million BTUs, and slipped to $2.90 shortly after the report was released.

For the period between August 16 and August 23, predicts “high” demand through Friday dropping to “moderate” next week and offers the following outlook:

A weather system with showers and comfortable highs of 70s and 80s will continue to bring showers to the Great Lakes and Ohio Valley the next few days. The West remains hot with highs of 90s to 100s, while the Southeast is also hot with highs of 90s. High pressure now dominates the East Coast with highs of 90s across major Northeast cities through Friday for strong demand. However, additional weather systems are expected into the central and then east-central US this weekend into early next week with showers and cooling, easing demand. Overall demand will be HIGH easing to MODERATE this weekend and next week.

In its August revision to the Short-Term Energy Outlook, the EIA estimated that dry gas production rose by 8.4 billion cubic feet per day to 81.8 billion cubic feet in July despite record-high demand and relatively low inventory levels. Daily production is forecast to rise to 84.3 billion cubic feet by the end of next year.

Total U.S. stockpiles rose week over week to 22.3% below last year’s level and are now 20% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 2.387 trillion cubic feet at the end of last week, around 595 billion below the five-year average of 2.982 trillion cubic feet and 687 billion below last year’s total for the same period. Working gas in storage totaled 3.074 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 0.7%, at $77.48 in a 52-week range of $72.16 to $89.30.
  • Chesapeake Energy Corp. (NYSE: CHK) traded down about 2.1%, at $4.31 in a 52-week range of $2.53 to $5.60.
  • EOG Resources Inc. (NYSE: EOG) traded up about 0.7% to $116.29. The 52-week range is $81.99 to $131.60.

In addition, the United States Natural Gas ETF (NYSEARCA: UNG) traded down about 1.5%, at $23.79 in a 52-week range of $20.40 to $27.92.

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