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US Natural Gas Inventories Could Pressure 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 July 14, 2016. The government agency reported that the US natural gas inventories had risen by 64 Bcf (billion cubic feet) to ~3.2 Tcf (trillion cubic feet) for the week ended July 8, 2016, compared with the previous week.

A Wall Street Journal survey estimated that US natural gas inventories might have risen by 56 Bcf during this period. The larger-than-expected rise in US natural gas inventories weighed on natural gas prices on July 14 and July 15. To learn more about natural gas prices, please read the previous part of this series.

The five-year average natural gas inventory injection for this period was 77 Bcf. Natural gas inventories rose by 98 Bcf for the corresponding period in 2015. They rose by 39 Bcf in the week ended July 1, 2016.

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US natural gas inventories by region 

The EIA divides the United States into five storage regions:

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

Below are the movements in natural gas inventories for these regions for the week ended July 8, 2016, compared with the previous week.

  • The East region rose by 24 to 678 Bcf.
  • The Midwest region rose by 21 to 785 Bcf.
  • The Mountain region rose by six to 208 Bcf.
  • The Pacific region rose by six to 319 Bcf.
  • The South Central region rose by seven to 1.3 Tcf.

Impact of natural gas inventories

US natural gas inventories are 18.5% higher than their five-year average. For the week ended July 8, 2016, US gas inventories were 22.1% higher than the corresponding period in 2015.

In its July Short-Term Energy Outlook Report, the EIA estimated that the US natural gas inventories would be ~4.0 Tcf by the end of October 2016—the beginning of the heating season in 2016–2017. This would be the highest level on record for this period of the year. High natural gas inventories should pressure natural gas prices.

Lower natural gas prices affect US natural gas producers such as Comstock Resources (CRK), Antero Resources (AR), and Ultra Petroleum (UPL). The ups and down in oil and gas prices can impact ETFs and ETNs such as the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL), the First Trust ISE-Revere Natural Gas ETF (FCG), and the VelocityShares 3x Inverse Natural Gas ETN (DGAZ).

The US natural gas rig count also plays a vital role in driving natural gas prices. To learn more, read on to the next part of this series. 

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