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Are US Natural Gas Supply and Demand Rebalancing?

PART:
1 2 3 4 5 6 7
Part 3
Are US Natural Gas Supply and Demand Rebalancing? PART 3 OF 7

Why US Natural Gas Inventories Are above their 5-Year Average

EIA natural gas inventories  

On September 14, the EIA (U.S. Energy Information Administration) released its weekly US natural gas inventory report. It reported that US natural gas inventories rose by 91 Bcf (billion cubic feet) or 2.8% to 3,311 Bcf from September 1 to 8. However, inventories are down 5.1% or 179 Bcf from the same period in 2016.

A market survey estimated that inventories would have risen by 85 Bcf from September 1 to 8. US natural gas (UNG)(UGAZ) prices rose on September 14 despite the better-than-expected rise in natural gas inventories.

Why US Natural Gas Inventories Are above their 5-Year Average

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Natural gas prices are at a two-week high. Higher natural gas (DGAZ)(FCG) prices have a positive impact on natural gas producers’ earnings, including Cabot Oil & Gas (COG), Newfield Exploration (NFX), Rice Energy (RICE), and WPX Energy (WPX). For more on natural gas price and drivers, see Part 1 of this series.

US natural gas inventories by region 

Movements in natural gas inventories for the reported storage regions from September 1 to 8 are as follows:

  • the East rose by 28 Bcf (billion cubic feet) to 809 Bcf
  • the Midwest rose by 34 Bcf to 906 Bcf
  • the Mountains rose by three Bcf to 208 Bcf
  • the Pacific was flat at 296 Bcf
  • the South Central area rose by 26 Bcf to 1,092 Bcf

Impact

US natural gas inventories are 1.3% above their five-year average for the week ending September 8. They were 21% above their five-year average in March 2017, which suggests that US natural gas inventories are rebalancing toward historical average levels, supporting natural gas prices.

The EIA released its “Short-Term Energy Outlook” report on September 12. It estimates that US natural gas inventories will fall below their five-year average in October 2017.

A fall below the five-year average could have a positive impact on natural gas (GASL)(BOIL) prices. Higher natural gas prices have a positive impact on natural gas producers earnings, including Newfield Exploration and WPX Energy.

In the next part of this series, we’ll discuss how US natural gas and even crude oil rigs impact natural gas prices.

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