Natural Gas Stocks Rise Less Than Expected in June 12 Week

The EIA’s (U.S. Energy Information Administration) Natural Gas Weekly Update for the week ended June 12 showed that natural gas stocks increased by 89 billion cubic feet (or bcf) to 2,433 bcf. Analysts were expecting a larger increase of 93 bcf.

When inventories rise less than expected, it’s bullish for natural gas prices. In turn, it’s positive for natural gas producers such as Chesapeake Energy (CHK), Devon Energy (DVN), Range Resources (RRC), and QEP Resources (QEP). All these companies are components of the iShares U.S. Energy ETF (IYE), making up ~3% of the fund.

The 89 bcf net injection last week compares to a net injection of 112 bcf in the same week last year and a five-year average net injection of 87 bcf.

According to the EIA, from the week ending April 3, which is the beginning of the injection season, through the week ending June 12, net injections totaled 972 bcf. This compares to 870 bcf injections in the same 11 weeks last year and a 736 bcf five-year average.

After the 89 bcf build last week, natural gas stocks as of June 12 were ~43% higher than last year’s levels and ~2% higher than the five-year average. This was the same as the previous week.

Markets are keeping a close watch on inventories to see if they’ll keep outpacing the five-year average, resonating a robust US natural gas production, in the weeks to come. If the beats sustain for many weeks, it will be bearish for natural gas prices.

The EIA’s June STEO (Short-Term Energy Outlook), released on June 9, forecasts end of injection season (October) inventories to total 3,912 bcf. This is 115 bcf higher than the previous five-year average.

In the next part of this series, we’ll see how natural gas prices performed this week.