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What to Expect from the EIA’s Natural Gas Storage Report

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EIA report

The EIA (U.S. Energy Information Administration) will release the weekly gas in storage report today at 10:30 AM. Last week, the weekly gas stockpile rose by 76 Bcf (billion cubic feet) to 1,786 Bcf from 1,710 Bcf for the week ending May 1. The current inventories are 70% more than the levels last year.

The industry estimates expect an increase of 117 Bcf for the week ending May 8. The rise in inventory implies that there’s more supply or weak demand. If the inventory increases more than the industry estimates, it would put downward pressure on natural gas prices.

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The recent rally suggests that natural gas prices are ignoring the demand and supply picture of the natural gas market. Production from the lower 48 states in the US continues to increase to 79.2 Bcf from 75.93 Bcf last year. The natural gas supply from dry production and wellhead production also continued to outpace last year’s production by almost 4%, respectively.

Gas deliveries to residential and commercial saw an increase this week. The demand for natural gas increased from electric power plants. They continue to soar this week. Warmer weather also added to the demand for natural gas. The long-term supply estimates are still ahead of the demand consensus.

Oil and gas ETFs like the Energy Select Sector SPDR ETF (XLE) and the Spider Oil and Gas ETF (XOP) moved in the opposite direction from natural gas prices in yesterday’s trade.

The increase in natural gas benefits energy companies like WPX Energy (WPX), ExxonMobil (XOM), and QEP Resources (QEP). They account for 3.81% of XOP. These companies have a gas production mix that’s greater than 45% of their production portfolio.

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