A must-know analysis of EIA’s latest natural gas inventory report

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Storage draw

On November 20, the US Energy Information Administration (or EIA) reported a 17 billion cubic feet (or bcf) natural gas inventory draw for the week ending November 14. Inventories decreased to 3,594 bcf.

This number is 19 bcf smaller than the 36 bcf draw in the corresponding week last year. But, it’s 7 bcf larger than the five-year average net withdrawal of 10 bcf for this time of year. As the table below notes, inventories were 5.3% lower compared to last year’s levels, and 6.4% lower compared to five-year average levels.

P2 - Inv Snapshot

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 during the injection season, deficit levels eased to just ~6.2% before winter withdrawals began.

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End of injection season

The US added 2,789 bcf of natural gas to storage in the 2014 injection season. This is significantly higher than the 2,131 bcf injection last year, and also higher than the 2,034 bcf injection, which was the average for the corresponding weeks between 2009 and 2013.

Before the start of the injection season, inventories totaled 822 bcf, the lowest since April 2003. For context, April 2013 storage levels were 1,675 bcf, more than double the 2014 figure.

The injection season typically lasts from April 1 through October 31. However, natural gas injection sometimes continues into November as well.

But, with this 17 bcf withdrawal, the injection season is now formally over, and we’ll likely see a drawdown of inventories over the winter, typically lasting until March.

Key stocks and ETFs

Changes in prices affect natural gas producers and natural gas inventory movements affect prices.

American gas producers that will be affected by prices and inventory movements include Range Resources (RRC), Southwest Energy (SWN), Devon Energy (DVN), and Chesapeake Energy (CHK). Most of these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

In the next part of the series, we’ll discuss how natural gas prices moved last week.

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