Natural Gas Price Weakens Following Lower Inventory Drawdown

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The U.S. Energy Information Administration (EIA) reported Wednesday morning that U.S. natural gas stockpiles decreased by 59 billion cubic feet for the week ending November 23.

Analysts were expecting a storage withdrawal of between 65 billion and 82 billion cubic feet. The five-year average for the week is a withdrawal of 49 billion cubic feet, and last year’s withdrawal totaled 35 billion cubic feet. Natural gas inventories fell by 134 billion cubic feet in the week ending November 16.

Natural gas futures for January delivery traded down about six cents in advance of the EIA’s report, at around $4.54 per million BTUs, and it slipped further to $4.47 after the report was released.

For the period between November 29 and December 5, NatGasWeather.com predicts “high” demand and offers the following outlook:

Cool conditions linger across the Great Lakes and East with highs of 20s to 40s. However, warm high pressure will strengthen across the central and southern US the next few days with highs of 60s to near 80F, then expanding across the Great Lakes and East this weekend, with highs warming into the 50s and 60s for light demand. The West will see weather systems bring rain, snow, and colder temperatures. Cold air will spread across much of the country early next week with lows dropping into the -10s to 20s across the central and northern US.

Earlier this week, some natural gas trades at the Waha hub in north Texas were made at negative rates. That is, gas producers had to pay customers to take the gas. The situation is down to a massive increase in the production of natural gas associated with oil production and a shortage of pipeline transportation to move the oil from the Permian Basin to the Gulf Coast and the natural gas to the central pricing point at Henry Hub in northern Louisiana. Check out our story on what’s going on.

Total U.S. stockpiles of natural gas decreased week over week from 16.6% to 17.6% below last year’s level and also fell from 18.6% to 19.1% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.054 trillion cubic feet at the end of last week, around 720 billion cubic feet below the five-year average of 3.774 trillion cubic feet and 644 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.698 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 $78.54 in a 52-week range of $72.16 to $89.30.
  • Chesapeake Energy Corp. (NYSE: CHK) traded down about 0.7%, at $2.99 in a 52-week range of $2.53 to $5.60.
  • EOG Resources Inc. (NYSE: EOG) traded up about 0.5% to $104.24. The 52-week range is $96.54 to $133.53.

Also, the United States Natural Gas ETF (NYSEARCA: UNG) traded down about 3% to $36.62, in a 52-week range of $20.40 to $39.87.