Natural gas supply and demand
Natural gas production from the lower 48 states of the US increased slightly by 0.6% to 79.82 Bcf (billion cubic feet) as of May 20, 2015—compared to the previous week. The natural gas from well head and dry production also increased week-over-week. The production is 4.5% higher than the levels last year.
Gas deliveries to the residential and commercial segment increased week-over-week. However, it was 3.2% lower than the consumption last year. Gas flows to power plants continued to increase week-over-week. Their consumption is 14.2% more than the levels last year. Lately, mild weather curbed the demand for natural gas prices. Inventories gauge the supply and demand balance.
Natural gas inventory
The EIA (U.S. Energy Information Administration) will publish the natural gas inventory report on May 21 at 10:30 AM. Government data showed that the gas stockpile rose by 111 Bcf to 1,897 Bcf—up from 1,786 Bcf in the week ending May 8. The current inventories are 63% more than the levels last year. However, it’s 8.7% below the five-year average of 1,935 Bcf. The market consensus suggests that natural gas inventories rose by 99 Bcf for the week ending May 15. This means that supply is more or demand is slowing.
The bigger-than-expected inventory might push natural gas prices even lower. The long-term oversupply sentiments might be fueled and we could see natural gas prices crash.
Oil and gas ETFs like the Energy Select Sector SPDR Fund (XLE) increased slightly. The SPDR Oil & Gas Exploration & Production ETF (XOP) decreased marginally in yesterday’s trade—in line with natural gas prices.
Upstream stocks like Cabot Oil (COG), Rice Energy (RICE), and Exco Resources (XCO) have a natural gas production mix that’s greater than 90% of their total production. They account for 2.81% of XOP. The stocks’ return drops due to falling natural gas prices.