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Weekly Natural Gas Inventories Exceeded Analyst Expectations

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Inventories increased more than expected

The EIA’s (U.S. Energy Information Administration) natural gas weekly update for the week ended April 10 shows that natural gas stocks increased by 63 Bcf (billion cubic feet) to 1,539 Bcf. Analysts had been expecting an increase of 53 Bcf.

When inventories rise more than expected, it’s bearish for natural gas prices. This in turn hurts gas producers such as Cabot Oil & Gas (COG), EOG Resources (EOG), Southwest Energy (SWN), and Chesapeake Energy (CHK). All of these companies are components of the iShares Global Energy ETF (IXC) and make up 3% of the ETF.

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Comparing current stocks with last year and five-year average

After the 63 Bcf build last week, natural gas inventories as of April 10 were ~82 % higher than last year’s levels. Still, they’re ~9% lower than the five-year average. Inventories briefly surpassed the five-year average a few weeks ago.

The net injection this week contrasts with a net injection of 22 Bcf in the same week last year, and a five-year average net injection of 35 Bcf.

March inventories in 2014 and 2015

March 2015 inventories were 75% higher than last year but 12% lower than the previous five-year average. Inventories as of March 27, 2015, were 1,461 Bcf compared to 822 Bcf as of March 28, 2014.

In its April “Short-Term Energy Outlook,” the EIA forecast that end-of-October 2015 inventories will total 3,781 Bcf. It forecasts a net injection of 2,310 Bcf during the injection season that runs between April and October.

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