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Natural Gas Inventory: Natural Gas Prices Could Decline More

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EIA’s gas inventory report

On Thursday, June 18, 2015, the EIA (U.S. Energy Information Administration) will release the weekly US natural gas in storage report. Government data showed that the stockpile rose by 111 Bcf (billion cubic feet) to 2,344 for the week ending June 5, 2015. Normal weather supported the rise in natural gas stocks over the same period. Market consensus suggests that natural gas stocks could increase by 94 Bcf for the week ending June 12, 2015. The possible decline in the stockpile from the previous week could be due to warmer weather estimates.

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Increasing inventories imply that the natural supply is increasing or demand is slowing. A better-than-expected rise in the stockpile could drag natural gas prices lower. In contrast, a lower-than-expected inventory increase might support natural gas prices. Current gas inventories are 43.7% above the level of 1,591 Bcf last year. They’re also 2% more than the five-year average stockpile of 2,300 Bcf. The five-year average natural gas stock gain is at 89 Bcf. The natural gas stockpile rose by 112 Bcf during the same period last year.

The consensus of slowing natural gas production and mild weather estimates could swing natural gas prices in either direction. Oil and gas producers like Energy EXXI (EXXI), Antero Resources (AR), and Range Resources (RRC) are also affected by declining natural gas prices. Combined, these stocks account for 3.87% of the Spider Oil and Gas ETF (XOP). They also have a natural gas production mix that’s more than 45% of their production portfolio.

Oil and gas ETFs like the Energy Select Sector SPDR ETF (XLE) and XOP are also impacted by lower natural gas prices.

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