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Less-Than-Expected Rise in Natural Gas Inventory Supported Prices

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Apr. 8 2016, Updated 12:04 a.m. ET

US natural gas inventory

On March 24, 2016, the EIA (U.S. Energy Information Administration) published its weekly natural gas inventory report. The government agency reported that the US natural gas inventory rose by 15 Bcf (billion cubic feet) to 2,493 Bcf for the week ended March 18, 2016. The Wall Street Journal surveys estimated a rise of 22 Bcf for this period. The US natural gas withdrawal was at four Bcf for the same period in 2015. The five-year average natural gas withdrawal during this period was 24 Bcf. The less-than-expected rise in natural gas inventories led to the rise in natural gas prices on March 24, 2016. Read more on the latest natural gas price movement in the first part of the series.

Less-than-Expected Rise in Natural Gas Inventory Supported Prices

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US natural gas inventory by region

The EIA divides the US into five storage regions: East, Midwest, Mountain, Pacific, and South Central. The natural gas inventory rose by 18 Bcf to 1,061 Bcf in the South Central region between March 11 and March 18, 2016. The weekly gas stockpile rose by one Bcf in the Mountain, East, and Pacific regions to 148 Bcf, 453 Bcf, and 260 Bcf, respectively, for the same period. In contrast, natural gas inventory fell by six Bcf to 571 Bcf in the Midwest region for the same period.

Impact

The US natural gas inventories are 69% more than the same period last year. They’re also 51% more than the five-year average. High natural gas stockpiles could limit the rally for US natural gas prices. Consequently, lower natural gas prices negatively affect the margins of oil and gas producers like QEP Resources (QEP), EXCO Resources (XCO), Ultra Petroleum (UPL), Cabot Oil & Gas (COG), and Gulfport Energy (GPOR).

Natural gas prices affect ETFs and ETNs like the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the United States Natural Gas ETF (UNG), the PowerShares DB Energy Fund (DBE), and the Fidelity MSCI Energy ETF (FENY).

Now let’s analyze the latest update on natural gas rig counts.

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