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Another Natural Gas Inventory Drawdown Supported Prices

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Jan. 22 2016, Updated 1:52 p.m. ET

Natural gas inventory report  

The EIA (U.S. Energy Information Administration) published its weekly US commercial natural gas inventory report on January 21, 2016. The government agency reported that the US natural gas inventory fell by 178 Bcf (billion cubic feet) to 3,297 Bcf for the week ended January 15. Last week, the natural gas inventory fell by 168 Bcf to 3,475 Bcf for the week ended January 8.

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Natural gas inventory estimates  

The US natural gas inventory fell for the seventh straight week last week. Industry surveys estimated that natural gas inventories could fall by 150 Bcf for the week ending January 15, 2016. The better-than-expected fall in natural gas inventories boosted natural gas prices. This implies fewer supplies or more demand. Weather also supported natural gas prices, as we saw in the previous part of this series.

The five-year seasonal drawdown is at 160 Bcf. The natural gas inventory fell by 220 Bcf last year during the same period.

Natural gas inventory by region 

The EIA divides the United States into five storage regions: the East, Midwest, Mountain, Pacific, and South Central regions. The natural gas inventory fell the most in the Midwest, South Central, and Eastern regions. Natural gas inventories fell by 63 Bcf, 50 Bcf, and 44 Bcf, respectively, in these areas for the week ending January 15, 2016. The biggest drawdowns within the United States  suggest more demand or cold weather in these regions.

The recent surge in natural gas prices benefits US upstream players like Anadarko Petroleum (APC), Rex Energy (REXX), QEP Resources (QEP), Gulfport Resources (GPOR), and EQT (EQT). These companies’ natural gas production mix is greater than 50% of their total production portfolio.

ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), and the PowerShares DB Energy Fund (DBE) are also affected by the rise and fall in natural gas prices.

To learn about the count of US natural gas rigs and their impact on the markets, continue to the next part of this series.

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