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Record US Natural Gas Inventories Hurt 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 November 10, 2016. It reported that US natural gas inventories rose by 54 Bcf (billion cubic feet) to 4,017 Bcf between October 28 and November 4, 2016. US natural gas inventories broke the previous record of 4,009 Bcf hit on November 20—the highest ever.

Wall Street Journal survey estimated that US natural gas inventories would rise by 53 Bcf for the same period. The rise in US natural gas inventories in line with market expectations pressured US natural gas prices on November 10, 2016. For more on prices, read Part 1 and Part 2 of this series.

The five-year average natural gas injection for this period is 38 Bcf. Natural gas inventories rose by 54 Bcf during the same period in 2015. They rose by 54 Bcf in the week ending on October 28, 2016.

US natural gas inventories rose more than the five-year average for the first time in the last five weeks. It will pressure natural gas prices in the short term. For more on prices, read Part 1 and Part 2 of this series.

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Impact  

For the week ending November 4, 2016, US natural gas inventories were 4.9% higher than their five-year average. They were also 1.2% higher than the same period in 2015.

Record natural gas inventories could pressure natural gas prices and vice versa. Lower natural gas prices can have a negative impact on oil and gas producers’ profitability such as Cimarex Energy (XEC), Cabot Oil & Gas (COG), Southwestern Energy (SWN), Antero Resources (AR), and Memorial Resource Development (MRD).

Volatility in crude oil and natural gas prices can impact funds such as the United States Natural Gas ETF (UNG), the Direxion Daily Energy Bear 3x ETF (ERY), the ProShares UltraShort Bloomberg Crude Oil (SCO), the United States Oil ETF (USO), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the Direxion Daily Natural Gas Related Bull 3X ETF (GASL), and the PowerShares DWA Energy Momentum ETF (PXI).

Next, we’ll take a look at US natural gas inventories by region and US natural gas inventory forecasts for March 2017.

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