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Small Rise in US Natural Gas Inventories Boosted Natural Gas Prices

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EIA’s natural gas inventories 

The EIA (U.S. Energy Information Administration) released its Weekly Natural Gas Inventory Report on June 2, 2016. It reported that the US natural gas inventories rose by 82 Bcf (billion cubic feet) to 2,907 Bcf between May 20 and May 27, 2016.

Wall Street Journal polls projected that natural gas inventories might have risen by 86 Bcf for this period. The smaller-than-expected rise in natural gas inventories pushed natural gas prices to the highest levels in five months. For more on natural gas prices, read the previous part of this series. The five-year average natural gas injection during this period is 98 Bcf. Natural gas inventories added 126 Bcf for the same period in 2015. 

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US natural gas inventories by region 

The EIA divides the US into five storage regions:

  1. East
  2. Midwest
  3. Mountain
  4. Pacific
  5. South Central

Below are the movements in crude oil inventories for these regions between May 20, 2016, and May 27, 2016.

  • The East region saw a rise of 26–537 Bcf.
  • The Midwest region saw a rise of 26–655 Bcf.
  • The Mountain region saw a rise of 7–178 Bcf.
  • The Pacific region saw a rise of 6–304 Bcf.
  • The South Central saw a rise of 17–1,233 Bcf.

Impact of natural gas inventories 

The US natural gas inventories are 32.4% more than the same period in 2015. They’re also 35% more than the five-year average. High natural gas inventories will limit the upside for natural gas prices.

Multiyear low natural gas prices impact natural gas producers like Rice Energy (RICE), Antero Resources (AR), Ultra Petroleum (UPL), and Memorial Resource Development (MRD).

The uncertainty in oil and gas prices impacts ETFs and ETNs such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the Direxion Daily Natural Gas Related Bull 3x Shares ETF (GASL), and the First Trust ISE-Revere Natural Gas ETF (FCG).

The US natural gas rig count and natural gas production also play a vital role in driving natural gas prices. To learn more, please read the next two parts of this series. 

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