Natural Gas Price Higher on Smaller-Than-Expected Storage Increase

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stockpiles increased by 48 billion cubic feet for the week ending August 17.

Analysts were expecting a storage injection of 50 billion to 55 billion cubic feet. The five-year average for the week is an injection of 52 billion cubic feet, and last year’s storage increase for the week totaled 45 billion cubic feet. Natural gas inventories rose by 33 billion cubic feet in the week ending August 10.

Natural gas futures for September delivery traded down about a penny in advance of the EIA’s report, at around $2.94 per million BTUs and rose to $2.96 shortly after the report was released.

For the period between August 23 and August 29, NatGasWeather.com predicts “moderate” demand through Friday rising to “high” next week and offers the following outlook:

Comfortable conditions will linger across the Midwest, Mid-Atlantic, and Northeast the next couple days with highs only in the 70s to mid-80s for light demand. The West, South, and Southeast will be mostly hot with highs of mid-80s to 100s. This weekend, hot high pressure will build over the eastern half of the US with upper-80s to 100s gaining ground for strong national demand, while much of the West cools from recent heat. Overall demand will be MODERATE into Saturday, then increasing to HIGH this weekend through 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 21.9% below last year’s level and are now 19.7% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 2.435 trillion cubic feet at the end of last week, around 599 billion below the five-year average of 3.034 trillion cubic feet and 684 billion below last year’s total for the same period. Working gas in storage totaled 3.119 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 down about 0.6%, at $79.46 in a 52-week range of $72.16 to $89.30.
  • Chesapeake Energy Corp. (NYSE: CHK) traded down about 1.4%, at $4.65 in a 52-week range of $2.53 to $5.60.
  • EOG Resources Inc. (NYSE: EOG) traded down about 0.9% to $116.26. The 52-week range is $81.99 to $131.60.

Also, the United States Natural Gas ETF (NYSEARCA: UNG) traded flat at $24.18, in a 52-week range of $20.40 to $27.92.