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Inventory Consensus Is Negative for Natural Gas Prices

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EIA gas inventory report

For the week ending June 19, 2015, the EIA (U.S. Energy Information Administration) will release the natural gas storage report on June 25, 2015. Last week, EIA data showed that gas in storage rose by 89 Bcf (billion cubic feet) to 2,433 Bcf for the week ending June 12, 2015. The market consensus shows that gas stocks rose by 80 Bcf for the week ending June 19, 2015. The increase in gas stocks is due to below normal weather and slowing demand.

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The rising stockpile implies that supply is rising or demand is slowing. The natural gas in storage rose by 112 Bcf over the same period in 2014. The five-year average gain is at 87 Bcf. Currently, the stockpile is 42.9% more than the level of 1,703 Bcf in 2014. The stockpile is also 1.9% more than the five-year average level of 2,387 Bcf.

Oil and gas exploration and production companies like Exco Resources (XCO), Cimarex Energy (XEC), and WPX Energy (WPX) are also impacted by falling natural gas prices. Combined, they account for 3.17% of the Spider Oil and Gas ETF (XOP). These stocks have a natural gas production mix that’s more than 43% of their total production.

Lower natural gas prices also impact ETFs like the Energy Select Sector SPDR ETF (XLE) and XOP. These ETFs diverged from the price direction of natural gas in yesterday’s trade. Even the S&P 500 also moved in the opposite direction from natural gas prices. XOP and XLE consist of crude oil and natural gas producing companies.

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