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What to Expect from the EIA’s Natural Gas Inventory Report

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Natural gas stocks report

On July 16, 2015, the EIA (U.S. Energy Information Administration) will release the weekly natural gas report for the week ending July 10. Last week, the government data showed that natural gas inventories rose by 91 Bcf (billion cubic feet) to 2,668 Bcf for the week ending July 3, 2015. Industry consensus suggests that natural gas stocks could rise by 88 Bcf for the week ending July 10, 2015. Mild weather estimates have led to the rise in natural gas stocks.

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Natural gas stocks might rise for 15 straight weeks

As of July 9, 2015, natural gas stocks rose for 14 consecutive weeks. If natural gas inventories rise for the week ending July 10, 2015, it would mean that natural gas prices have risen for 15 consecutive weeks. The rising inventories imply that supply is rising or demand is slowing. The better-than-expected rise in natural gas prices could drag natural gas prices lower. In contrast, a worse-than-expected inventory fall might support natural gas prices.

Current natural gas inventories are 32% more than the level of 2,009 Bcf in 2014. They’re also 1.70% more than the five-year average of 2,623 Bcf. So far, the five-year natural gas gain during this period of the year is 71 Bcf. Despite record inventories, natural gas production will also play a major role in driving natural gas prices.

The uncertainty in natural gas prices negatively affects natural gas producers like Contango (MCF), Sandridge (SD), and Parsley Energy (PE). They account for 4.21% of the SPDR Oil and Gas ETF (XOP). These stocks have gas production mix that’s more than 46% of their total production. They also affect oil and gas ETFs like the Energy Select Sector SPDR ETF (XLE) and XOP.

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