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Record Natural Gas Inventory: Downward Pressure on Prices

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EIA natural gas inventory data 

The EIA (U.S. Energy Information Administration) will release its report on natural gas in storage on October 29, 2015. Last week, natural gas stocks rose by 81 Bcf (billion cubic feet) to 3,814 Bcf for the week ended October 16, 2015. For the week ended October 9, 2015, natural gas inventory rose by 100 Bcf to 3,733 Bcf.

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Natural gas inventory estimates and impact 

For the week ending October 24, 2014, natural gas stocks rose by 87 Bcf. The preliminary surveys suggest mild winter weather and record production could push natural gas inventory higher. The US natural gas stocks rose for the 29th consecutive week as of the week ended October 16, 2015. The current natural gas inventory is 12.8% greater than the 3,380 Bcf level during last year. Gas stocks are also 4.5% more than the five-year average level of 3,650 Bcf. The rising natural gas inventory implies that supplies are rising or that demand is slowing. To know more about natural gas production, please see the next part of this series. The rising inventory and record gas stocks could drag natural gas prices lower.

The falling natural gas prices could impact US upstream players like EXCO Energy (XCO), Devon Energy (DVN), Gulfport Energy (GPOR), and Memorial Resource Development (MRD). The natural gas production mix of these stocks is more than 40% of their production portfolio. These company’s account for 4.8% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

The volatility in the natural gas prices also impacts ETFs such as the PowerShares DB Energy ETF (DBE) and the iShares US Oil & Gas Exploration & Production ETF (IEO).

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