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Are Hedge Funds Turning Bullish on US Natural Gas Futures?

PART:
1 2 3 4 5
Part 3
Are Hedge Funds Turning Bullish on US Natural Gas Futures? PART 3 OF 5

Large Build in US Natural Gas Inventories Pressured Gas Prices

EIA’s natural gas inventories 

The EIA (U.S. Energy Information Administration) released its weekly natural gas inventory report on April 27, 2017. It reported that US natural gas inventories rose by 74 Bcf (billion cubic feet) to 2,189 Bcf on April 14–21, 2017. Inventories rose 3.5% week-over-week, but fell 14.1% YoY (year-over-year). The YoY fall in inventories is bullish for natural gas (UNG) (GASL) (DGAZ) prices.

However, US natural gas inventories hit 4,047 Bcf for the week ending November 11, 2016—the highest level ever. Inventories fell ~45.9% from their peak level. Changes in inventories impact natural gas prices. For more on natural gas prices and the weather, read Part 1 and Part 2 of this series.

Large Build in US Natural Gas Inventories Pressured Gas Prices

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A market survey estimated that US natural gas inventories would have risen by 74 Bcf on April 14–21, 2017.

A larger-than-expected rise in natural gas inventories pressured natural gas (FCG) (UGAZ) prices on April 27, 2017. The five-year average natural gas addition for this period is 57 Bcf. Natural gas inventories rose by 73 Bcf during the same period in 2016. They rose by 54 Bcf in the week ending April 14, 2017.

Moves in natural gas prices impact oil and gas producers’ profitabilities such as Cabot Oil & Gas (COG), Rice Energy (RICE), Newfield Exploration (NFX), and WPX Energy (WPX).

What’s the impact?  

For the week ending April 21, 2017, US natural gas inventories were 15.8% higher than their five-year average. They were 21.0% higher than their five-year average in early March 2017. The expectation of slowing inventories could support natural gas prices in 2017.

The US natural gas rig count also plays a vital role in driving natural gas prices. We’ll take a look at the US natural gas rig count in the next part of this series.

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