Inventories increased less than expected
The US Energy Information Administration’s (or EIA) “Natural Gas Weekly Update” for the week ended May 8 showed that inventories increased by 111 billion cubic feet (or bcf) to 1,897 bcf. Analysts were expecting an increase of 117 Bcf.
When inventories rise less than expected, they’re bullish for natural gas prices, which in turn is a positive for gas producers such as Chesapeake Energy (CHK), Devon Energy (DVN), Range Resources (RRC), and Antero Resources (AR). CHK, DVN, and RRC are components of the iShares Global Energy ETF (IXC) and they make up 1.6% of this ETF.
Comparing current inventories with last year and the five-year average
After the 111 bcf build last week, natural gas stocks as of May 8 were ~66% higher than last year’s levels but 2% lower than the five-year average. Inventories had briefly surpassed the five-year average in February before falling again. They do, however, seem to be moving closer to the five-year average with each passing week (see the graph below). For context, consider that inventories were 3.6% lower compared to the five-year average in the week ended May 1.
The net injection last week compares to a net injection of 101 bcf in the same week last year and a five-year average net injection of 82 bcf.
Per the EIA, from the week ended April 3, which is also the beginning of the injection season, through the week ended May 8, net injections totaled 436 bcf. This total compares to 312 bcf injection in the same five weeks last year and a 284 bcf five-year average.