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Will Natural Gas Inventories Rise for 15 Straight Weeks?

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EIA gas stocks report

For the week ended July 10, 2015, the EIA (U.S. Energy Information Administration) will publish its weekly natural gas in storage report on July 16. Surveys from Bloomberg and Reuters suggest that natural gas inventories increased by 95 Bcf for the week ended July 10, 2015.

Last week, the EIA estimated that natural gas stockpiles increased by 91 Bcf (billion cubic feet) to 2,668 Bcf for the week ended July 3, 2015. Mild weather forecast might have led to the increase in natural gas inventories.

The increase in natural gas inventories for the week ended July 10, 2015, could mean that natural gas inventories rose for 15 straight weeks. The consensus of increasing natural gas inventories should continue to pressure natural gas prices.

The increasing stockpile implies that supply is increasing or that demand is declining. On the other hand, declining inventories imply that supply is decreasing or that demand is increasing. This supports natural gas prices.

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Currently, natural gas stockpiles are 32% greater than the 2,009 Bcf recorded last year. They’re also 1.70% more than the five-year average of 2,623 Bcf. The five-year natural gas inventory increase for this part of the year is 71 Bcf. Last year, natural gas inventories increased by 105 Bcf over the same period. Some analysts expect that the recent surge in natural gas prices is due to short covering and that record inventories will continue to pressure natural gas prices.

Impact

Rising natural gas prices benefit gas producers like SM Energy (SM), Contango (MCF), and Sandridge (SD). Combined, these stocks account for 4.51% of the SPDR Oil and Gas ETF (XOP). These companies also have a natural gas production mix that’s greater than 46% of their total production. Higher gas prices also benefit ETFs like the Energy Select Sector SPDR ETF (XLE) and XOP.

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