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Why Are Natural Gas Inventories Rising?

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EIA stockpile report 

On Thursday, August 6, 2015, the EIA (U.S. Energy Information Administration) is scheduled to release its weekly natural gas stockpile report for the week ending July 31, 2015. The EIA reported that natural gas inventories rose by 52 Bcf (billion cubic feet) to 2,880 Bcf for the week ending July 24, 2015. Likewise, the natural gas stockpile rose by 61 Bcf for the week ending July 17, 2015.

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Impact

The natural gas stockpile could rise for the 18th straight week if it rose for the week ending July 31, 2015. The consensus from the Wall Street Journal and Platt’s projects that the natural gas stockpile might rise between 43 Bcf and 45 Bcf for the week ending July 31, 2015. The rising natural gas stockpile could negatively affect natural gas prices. The natural gas inventories might have risen due to rising production during this year and slowing demand due to mild weather estimates.

Currently, natural gas stocks are 25% more than the level of 2,294 Bcf last year. They’re also 3% more than the five-year average of 2,795 Bcf. The natural gas stockpile rose by 83 Bcf during the same period last year. The average five-year rise was at 53 Bcf.

The uncertainty in natural gas prices impacts upstream players like Rice Energy (RICE), ExxonMobil (XOM), and Newfield Exploration (NFX). Combined, these companies account for 3.05% of the Spider Oil and Gas ETF (XOP). These stocks’ natural gas production mix is more than 46% of their total production. They also affect oil and gas ETFs like XOP and the Energy Select Sector SPDR ETF (XLE).

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