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US Natural Gas Inventories Support 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 December 8, 2016. It reported that US natural gas inventories fell by 42 Bcf (billion cubic feet) to 3,953 Bcf between November 25 and December 2, 2016. US natural gas inventories fell due to higher demand for natural gas. Demand rose due to colder weather. US natural gas inventories hit 4,047 Bcf for the week ending November 11, 2016—the highest level ever.

Wall Street Journal survey estimated that US natural gas inventories would fall by 42 Bcf between November 25 and December 2, 2016. The fall in US natural gas inventories supported natural gas prices on December 8, 2016. For more on prices, read Part 1 and Part 2 of this series.

It’s the third draw of the season for US natural gas inventories. The five-year average natural gas withdrawal for this period is 62 Bcf. Natural gas inventories fell by 76 Bcf during the same period in 2015. They fell by 50 Bcf in the week ending on November 25, 2016.

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Impact  

For the week ending December 2, 2016, US natural gas inventories were 6.9% higher than the five-year average. They were also 1.3% more than the same period in 2015.

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

Moves in crude oil and natural gas prices can impact funds such as the United States Natural Gas ETF (UNG), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the United States Brent Oil ETF (BNO), the Direxion Daily Natural Gas Related Bull 3X ETF (GASL), the ProShares UltraShort Bloomberg Crude Oil (SCO), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), and the PowerShares DWA Energy Momentum ETF (PXI).

Next, we’ll take a look at US natural gas inventories by region. We’ll also look at the US natural gas inventory forecast for March 2017.

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