US natural gas inventories
On December 24, 2015, the EIA (U.S. Energy Information Administration) will publish its weekly natural gas in storage report. In the last report, the natural gas stockpile fell by 34 Bcf (billion cubic feet) to 3,846 Bcf for the week ended December 11, 2015. US natural gas inventory fell for the third straight week, falling by 163 Bcf. But before that, natural gas inventory had risen for 34 straight weeks.
The current natural gas inventory is 322 million more than the past five years. That means that inventories are 9.1% more than the five-year average. They are also 16.4% more than the level of 3,304 Bcf in 2014. Mild winter weather is responsible for less drawdown of natural gas stocks. Production is also at record levels. We’ll take a look at production in the next part of this series.
The peak season for natural gas demand is between November and March. But this year, the winter is expected to be mild. About 49% of US household use natural gas for heating purposes. The consensus of falling natural gas stocks benefits natural gas prices. So how much could natural gas inventories fall?
Last year for the same period, weekly natural gas stocks fell by 50 Bcf for the week ended December 19, 2014. Between December 19, 2014, and March 2015, natural gas inventory fell by 1,785 Bcf. So we could expect natural gas stocks to be at 2.1 Tcf (trillion cubic feet) in April 2016.
The weather is expected to be milder than last year. So drawdowns could be less compared to last year. The consensus of record natural gas inventory and mild winter weather will continuously put pressure on natural gas prices.
ETFs such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the PowerShares DB Energy ETF (DBE), and the PowerShares DWA Energy Momentum ETF (PXI) are also affected by the roller coaster ride of natural gas prices.