Natural Gas Price Dips as Inventory Rises Above Estimates

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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stockpiles increased by 70 billion cubic feet for the week ending August 24.

Analysts were expecting a storage injection of around 65 billion cubic feet. The five-year average for the week is an injection of 59 billion cubic feet, and last year’s storage increase for the week totaled 30 billion cubic feet. Natural gas inventories rose by 48 billion cubic feet in the week ending August 17.

Natural gas futures for October delivery traded up about a penny in advance of the EIA’s report, at around $2.87 per million BTUs, and slipped to $2.84 shortly after the report was released.

For the period between August 30 and September 5, NatGasWeather.com predicts “moderate” demand through Friday rising to “high” next week and offers the following outlook:

Hot high pressure will dominate the southern and far eastern US today with highs of upper 80s to 90s for strong national demand. However, a cool front with showers and thunderstorms continues advancing through the Midwest and into the Mid-Atlantic and will reach the East Coast Friday and Saturday with cooling, reducing national demand for a couple days before hot high pressure returns this weekend through next week with another round of above normal temperatures over most of the US besides the Northwest.

Natural gas prices remain depressed due to too much production, even though inventory levels are below both last year’s total and the five-year average. The EIA forecasts daily production will rise from around 82 billion cubic feet per day currently to 84.3 billion cubic feet by the end of next year.

Total U.S. stockpiles rose week over week to 20.5% below last year’s level and are now 19% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 2.505 trillion cubic feet at the end of last week, around 588 billion below the five-year average of 3.093 trillion cubic feet and 646 billion below last year’s total for the same period. Working gas in storage totaled 3.151 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 0.3% to $80.59, in a 52-week range of $72.16 to $89.30.
  • Chesapeake Energy Corp. (NYSE: CHK) traded up about 0.3%, at $4.52 in a 52-week range of $2.53 to $5.60.
  • EOG Resources Inc. (NYSE: EOG) traded up about 0.3% to $119.12. The 52-week range is $83.61 to $131.60.

The United States Natural Gas ETF (NYSEARCA: UNG) traded down about 0.3%, at $23.47 in a 52-week range of $20.40 to $27.92.