Inventories increased more than expected
The EIA’s (U.S. Energy Information Administration) Natural Gas Weekly Update for the week ending April 17 showed that stocks increased by 90 Bcf (billion cubic feet) to 1,629 Bcf. Analysts were expecting an increase of 86 Bcf.
When inventories rise more than expected, it’s bearish for natural gas prices. In turn, this hurts gas producers like Cabot Oil and Gas (COG), EOG Resources (EOG), WPX Energy (WPX), and Chesapeake Energy (CHK).
The previously mentioned companies are part of the iShares Global Energy ETF (IXC). They account for 3% of IXC.
Comparing current stocks with last year and the five-year average
After the 90 Bcf build last week, natural gas inventories as of April 17 were ~83% higher than the levels last year. However, they were ~6% lower than the five-year average. Inventories briefly surpassed the five-year average a few weeks ago, before falling again. They seem to be moving closer to the five-year average with each passing week. For context, inventories were 9% lower compared to the five-year average in the April 10 week.
The net injection this week compares to a net injection of 45 Bcf in the same week last year and a five-year average net injection of 46 Bcf.
March 2015 versus March 2014 inventories
March 2015 inventories were 75% higher than the previous year. However, they were 12% lower than the previous five-year average.
The EIA forecasted in its April STEO (Short-Term Energy Outlook) that the end-of-October 2015 inventories will total 3,781 Bcf. It forecasts a net injection of 2,310 Bcf during the injection season between April and October.