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Inventory Data Could Drag Natural Gas Prices Lower

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Aug. 13 2015, Published 11:16 a.m. ET

Inventory report

The EIA (U.S. Energy Information Administration) will publish the weekly natural gas inventory report on Thursday, August 13, 2015, at 10.30 AM EST for the week ending August 7, 2015. Last week, natural gas inventories rose by 32 Bcf (billion cubic feet) to 2,912 Bcf for the week ending July 31, 2015. Warm weather estimates could also draw down the rising natural gas inventory during this period. Warm weather is expected across the Northeast, mid-Atlantic, and Midwest regions of the US from August 15–24, 2015, according to sources from MDA Weather Services. This could also draw down inventories in the weeks ahead.

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Inventory estimate and impact

For the week ending August 7, 2015, a rise in the natural gas inventory would mean that natural inventories rose for the 19th consecutive week. The market surveys estimate that the natural gas in storage could rise by 43 Bcf (billion cubic feet) over the same period.

The consensus of rising natural gas stocks implies that supply is rising or demand is falling. In turn, this might put downward pressure on natural gas prices.

US oil and gas producers like Southwestern Energy (SWN), EQT (EQT), and Newfield Exploration (NFX) benefit from rising natural gas prices. Combined, they account for 3.18% of the Spider Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 46% of their production portfolio.

The rising natural gas prices also positively impact energy ETFs like the Spider Oil and Gas ETF (XOP) and the Energy Select Sector SPDR ETF (XLE). XLE rose in line with natural gas prices in yesterday’s trade. In contrast, XOP fell in yesterday’s trade.

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