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US Natural Gas Market: Exploring Investing Opportunities

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Part 2
US Natural Gas Market: Exploring Investing Opportunities PART 2 OF 5

Will US Natural Gas Inventories Fall below the 5-Year Average?

Natural gas price 

September US natural gas (UNG) (DGAZ) futures contracts fell 0.43% to $3.02 per MMBtu (million British thermal units) in electronic trading at 2:20 AM EST on July 21, 2017. Prices fell due to the bearish natural gas inventory report. However, prices are near a three-week high.

Volatility in natural gas prices impacts natural gas producers like Gulfport Energy (GPOR), Newfield Exploration (NFX), and EXCO Resources (XCO).

Will US Natural Gas Inventories Fall below the 5-Year Average?

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EIA’s natural gas inventories 

The EIA (U.S. Energy Information Administration) released its weekly natural gas storage report on July 20, 2017. It reported that US natural gas inventories rose by 28 Bcf (billion cubic feet) to 2,973 Bcf on July 7–14, 2017. Inventories rose 0.1% week-over-week but fell 9.1% year-over-year.

A market survey estimated that US natural gas inventories would have risen by 32 Bcf on July 7–14, 2017. US natural gas (UGAZ) (FCG) (BOIL) prices rose after the release of the inventory report on July 20, 2017. However, prices fell at the close of trade on July 20, 2017.

Historical averages 

US natural gas inventories had risen by 57 Bcf on June 30–July 7, 2017. Inventories rose by 34 Bcf during the same period in 2016. The five-year average addition for this period is at 59 Bcf.

Impact  

US natural gas inventories have fallen 27% from the peak. In March 2017, inventories were 21.0% higher than the five-year average. For the week ending July 14, 2017, inventories are 5% above their five-year average. It suggests that US natural gas inventories are slowing.

The EIA estimates that US natural gas inventories would be 0.3% higher than the five-year average by the end of December 2017. An expectation of a fall in US natural gas inventories would support natural gas prices.

In the next part, we’ll discuss the US natural gas rig count and how it impacts gas prices.

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