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Natural Gas Market: Supply and Demand

Gordon Kristopher - Author
By

Aug. 18 2020, Updated 4:45 a.m. ET

Natural gas supplies

Natural gas production, from dry production and wellhead production, continued to increase last week. Gas production from the lower 48 states in the US also saw a slight increase in natural gas production from the previous week. Bentek Energy reported that gross natural gas production is 6.85% more than the previous year and 0.06% more than the week ending May 13.

Gas deliveries to power plants were the key driver for natural gas consumption. The weekly and yearly gas flows to industrials saw a decline, according to Bentek Energy estimates. Last week, the demand from residential and commercials increased marginally. Mild weather estimates will also curb the demand for natural gas prices in the short term.

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EIA gas inventory report

On May 14, 2015, the EIA (U.S. Energy Information Administration) published the weekly natural gas report. The gas in storage increased by 111 Bcf (billion cubic feet) to 1,897 Bcf—up from 1,786 Bcf in the week ending May 8. The current inventories are 70% more than the inventories last year and 10% below the five-year average of 1,935 Bcf. The increasing inventories and consensus of decreasing demand will put pressure on natural gas prices.

Oil and gas ETFs like the Energy Select Sector SPDR Fund (XLE) and the SPDR Oil & Gas Exploration & Production ETF (XOP) diverged from natural gas prices and increased marginally in yesterday’s trade.

Energy companies like South Western Energy (SWN), ConocoPhillips (COP), and ExxonMobil (XOM) are impacted by lower gas prices. These stocks have a natural gas production mix that’s more than 43% of their total production portfolio. They account for 3.10% of XOP.

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