On July 16, 2015, the EIA (U.S. Energy Information Administration) released its weekly natural gas report. Government data showed that natural gas inventories increased by 99 Bcf (billion cubic feet) to 2,767 Bcf for the week ended July 10, 2015. Natural gas inventories rose by 91 Bcf to 2,668 Bcf for the week ended July 3, 2015. Mild weather led to the increase in the natural gas inventories.
Natural gas inventory estimates
Industry surveys projected that natural gas inventories could increase by 95 Bcf for the week ended July 10, 2015. The better-than-expected natural gas inventory increase led to a decline in natural gas prices. The inventory increase implies that supply is increasing or that demand is slowing.
Natural gas inventories increased for 15 consecutive weeks. The current natural gas inventories are 31% higher than the 2,114 Bcf recorded in 2014. They’re also 2.90% more than the five-year average of 2,694 Bcf. Natural gas inventories rose by 105 Bcf over the same week last year. Meanwhile, the five-year average gain over this period is 71 Bcf.
Declining natural gas prices should negatively affect the margins of crude oil and natural gas producers like Cimarex Energy (XEC), Contango (MCF), and Sandridge (SD). These companies account for 4.06% of the SPDR Oil and Gas ETF (XOP). The natural gas production mix of these stocks is more than 46% of their production portfolio.