Natural gas inventory
Commodity prices are a function of demand and supply. If demand increases while supply remains constant, prices increase because more customers are chasing each unit of the commodity. In contrast, if supply increases for a given level of demand, prices drop because the commodity is widely available. So natural gas inventory data is useful to help you get a clue as to natural gas prices.
The EIA (US Energy Information Administration) publishes a weekly natural gas inventory and withdrawal report every Thursday. The latest report is for the week ending February 27.
Natural gas inventory in line with expectations
Throughout the year, natural gas is stored underground in order to save the fuel for the peak demand during the winter. For the week ending February 27, the inventory came in at 1,710 billion cubic feet, or Bcf. This was almost in line with Wall Street analysts’ expectations.
The inventory figure for the week was lower than the five-year average of 1,825 Bcf. However, it remains higher than last year’s 1,196 Bcf. Severe winter in 2014 caused rapid inventory drawdown.
Impact on coal and utilities
The latest inventory data is neutral for coal industry (KOL) and utilities (XLE), as it’s in line with expectations. A fall in natural gas prices during last few months has hurt coal producers—especially those with operations in the east and Midwest—including Alpha Natural Resources (ANR), Arch Coal (ACI), and Peabody Energy (BTU).