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Why Did Natural Gas Stocks Beat Expectations?

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Inventories beat expectations

The EIA’s (U.S. Energy Information Administration) Natural Gas Weekly Update for the week ending May 1 showed that natural gas stocks increased by 76 Bcf (billion cubic feet) to 1,710 Bcf. Analysts were expecting an increase of 75 Bcf.

When inventories beat expectations, it’s bearish for natural gas prices. It’s also negative for gas producers like Chesapeake Energy (CHK), Southwest Energy (SWN), Range Resources (RRC), and Antero Resources (AR). These companies are all part of the iShares Global Energy ETF (IXC). They account for 1% of IXC.

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Current stocks versus last year and the five-year average

After the 76 Bcf build last week, natural gas inventories as of May 1 were 71% higher than the levels last year. However, they were ~3.6% lower than the five-year average. Inventories briefly surpassed the five-year average in February, before falling again. They seem to be moving closer to the five-year average each week. In the week ending April 24, the inventories were 4.2% lower than the five-year average.

The net injection last week compares to a net injection of 75 Bcf in the same week last year and a five-year average net injection of 68 Bcf.

According to the EIA, for the week ending April 3—the beginning of the injection season—through the week ending May 1, net injections totaled 325 Bcf. This compares to the 211 Bcf injection in the same four weeks last year and the average 202 Bcf injection between 2010 and 2014—the five-year average.

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