uploads///Natural Gas Inventories Spread versus Natural Gas futures

How Natural Gas Inventories Affect Prices


May. 26 2016, Updated 11:52 a.m. ET

Last week’s data

Natural gas (DGAZ) (UGAZ) (BOIL) (GASL) (FCG) inventories rose by 73 Bcf (billion cubic feet) in the week ended May 13, 2016, compared to the previous week, according to EIA (U.S. Energy Information Administration) data released on May 19, 2016.

Natural gas inventories were at 2,754 Bcf, 40.6% higher than their five-year average and 40.3% higher than they were one year ago. The EIA is releasing inventory data for the week ended May 20 on May 26.

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Natural gas inventories and prices

In the last ten years, when natural gas inventories have been higher than their five-year averages, prices have weakened. Between November 2013 and April 2014, when inventory levels fell short of the five-year average by the highest amount in the last ten years, natural gas prices spiked as high as $6.14 per MMBtu.

The downturn in natural gas prices since June 2008 could be linked to higher inventories compared to the five-year average. However, the weather also plays an important role in driving natural gas prices in the short term, apart from long-term production and inventory dynamics, which affect natural gas prices in the long term.

The above analysis could be important for natural gas–weighted stocks such as Gulfport Energy (GPOR), Comstock Resources (CRK), Rice Energy (RICE), and Range Resources (RRC).


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