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Will Natural Gas Stocks’ Consensus Drag Natural Gas Prices Lower?

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EIA stockpile report

The EIA (U.S. Energy Information Administration) is scheduled to release the weekly natural gas in storage report on August 27, 2015. Last week, the EIA reported that natural gas stocks rose by 53 Bcf (billion cubic feet) to 3,030 Bcf for the week ending August 14, 2015. Market surveys’ consensus had targeted a rise of 60 Bcf over the same period. However, the less-than-expected rise in US natural gas stocks supported natural gas prices.

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Impact

The natural gas inventories are expected to rise by 60 Bcf for the week ending August 21, 2015. This means that natural gas inventories rose for the 21st consecutive week. The five-year average rise during this period was 54 Bcf. Likewise, the natural gas stockpile rose by 84 Bcf during the same period in 2014.

Currently, the natural gas stockpile is 19.20% more than the level of 2,542 Bcf in 2014. It’s also 2.70% more than the five-year average inventory of 2,950 Bcf. The record inventory will continue to put downward pressure on natural gas prices.

The rising inventory implies that supply is rising or demand is falling. This will also negatively influence natural gas prices in the oversupplied market.

Upstream players like Southwestern Energy (SWN), Cabot Oil & Gas (COG), and Newfield Exploration (NFX) are positively impacted by rising natural gas prices. These stocks’ natural gas production mix is greater than 46% of their production portfolio. Combined, they account for 2.93% of the SPDR Oil and Gas ETF (XOP). Energy ETFs like the XOP and the Energy Select Sector SPDR ETF (XLE) are also positively impacted by rising natural gas prices.

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