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US Natural Gas Inventory Could Increase the Most since 2009

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Natural gas inventory 

The EIA (U.S. Energy Information Administration) is scheduled to release it Weekly Natural Gas Inventory Report on November 19, 2015. Previous data indicated that natural gas inventories rose by 54 Bcf (billion cubic feet) to 3,985 Bcf for the week ending November 6, 2015.

The US natural gas inventory had risen for 32 consecutive weeks as of the week ending November 6, 2015. 2,524 Bcf were added during this period.

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Natural gas inventory estimates and impact 

Market surveys from Bloomberg and the Wall Street Journal suggest that natural gas inventories could rise by 19 Bcf and 17 Bcf, respectively, for the week ending November 13, 2015. Currently, natural gas inventories are 10% higher than last year’s level of 3,611 Bcf. They are also 4.7% higher than the five-year average of 3,805 Bcf.

If the natural gas inventory is reported to have risen in the week ending November 13, 2015, as estimates suggest, it will have been the highest inventory increase during this period of the year since 2009. The rise in inventory is due to rising production and weak demand.

Natural gas production

US natural gas production is 6.3% higher than its 2014 levels. The current production is at 79.6 Bcf (billion cubic feet) per day, as per EIA’s sources. The increase in drilling efficiency led to the rise in natural gas prices. The rise in production will be driven by the Marcellus and Appalachian shales as new pipelines come online.

Rising production will drag natural gas prices lower. This will impact upstream players such as Cabot Oil & Gas (COG), Range Resources (RRC), Newfield Exploration (NFX), and Southwestern Energy (SWN).

The roller coaster of the oil and gas market will also affect ETFs such as the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI).

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