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Analyzing the EIA’s natural gas inventory report and forecast

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EIA report

On October 23, the U.S. Energy Information Administration (or EIA) reported a 94 billion cubic feet (or bcf) natural gas inventory build for the week ending October 17. Inventories increased to 3,393 bcf (billion cubic feet).

This number was 8 bcf larger than the 86 bcf injection last year. It was 24 bcf larger than the five-year average net injection of 70 bcf for this time of year.

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Comparing the five-year average

After a severe winter last year, natural gas inventory levels fell to a record ~55% deficit compared to the five-year average in March 2014. However, after heavy additions in the “injection season,” deficit levels have currently eased to just 9.1%.

According to the EIA, the U.S. has added 2,571 bcf of natural gas to storage in the 2014 injection season. This is significantly higher than the 2,029 bcf injection last year and also higher than the 1,917 bcf injection in the same weeks between 2009 and 2013, on average.

Inventories projected to increase further

The injection season continues until October 31. However, according to the EIA, in the past 11 years, the injection continued into November as well.

The EIA forecasts that the end-of-October working natural gas inventory level will be 3,532 bcf. As of October 7, this means that this goal would require an average injection of 70 bcf per week through the end of October to achieve this goal.

But this inventory level is still below the five-year average peak storage value of 3,855 bcf.

Key stocks and ETFs

Price changes affect natural gas producers. Natural gas inventory movements affect these prices.

Gas producers include Range Resources (RRC), Cabot Oil and Gas (COG), Devon Energy (DVN), and Southwest Energy (SWN). Most of these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Aside from natural gas inventories, Market Realist also covers weekly crude inventory movements. Check out Market Realist’s Energy & Power page to read about last week’s crude inventory movements.

In the next part of this series, we’ll discuss how natural gas inventory levels affected prices this week.

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