US Natural Gas Inventories Fell below the 5-Year Average

EIA’s natural gas inventories 

The EIA (U.S. Energy Information Administration) released its weekly natural gas inventory report on December 29, 2016. It reported that US natural gas inventories fell by 237 Bcf (billion cubic feet) to 3,360 Bcf from December 16–23, 2016.

Natural gas inventories fell below their five-year average because of higher demand due to colder weather. However, US natural gas inventories hit 4,047 Bcf for the week ending November 11, 2016. It was the highest level ever. For more on prices and weather, read Part 1 and Part 2 of this series.

US Natural Gas Inventories Fell below the 5-Year Average

A market survey estimated that US natural gas inventories would fall by 220 Bcf–230 Bcf from December 16–23, 2016. The larger-than-expected fall in US natural gas inventories limited the downside for natural gas (FCG) (BOIL) (UNG) (GASL) prices on December 29, 2016. However, natural gas prices hit a 2016 high on December 28, 2016. Prices fell due to profit-booking the next day. For more on prices, read Part 1 of this series.

It’s the sixth draw of the season for US natural gas inventories. The five-year average natural gas withdrawal for this period is 80 Bcf. Natural gas inventories fell by 58 Bcf during the same period in 2015. They fell by 209 Bcf in the week ending December 16, 2016.

What’s the impact? 

A record withdrawal of natural gas over the last two weeks pushed natural gas prices to 2016 highs. For the week ending December 23, 2016, US natural gas inventories were 2.3% lower than the five-year average. US natural gas inventories are below the five-year average for the first time since 2015. They’re also 11% lower than the same period in 2015.

Falling US natural gas inventories and a cold winter could support natural gas prices in 2017. High natural gas prices could have a positive impact on oil and gas producers’ profitability such as Southwestern Energy (SWN), Cimarex Energy (XEC), and Memorial Resource Development (MRD).

The ups and downs in crude oil and natural gas prices can impact funds such as the United States Natural Gas ETF (UNG), the United States Brent Oil ETF (BNO), the Direxion Daily Natural Gas Related Bull 3X ETF (GASL), the ProShares UltraShort Bloomberg Crude Oil (SCO), 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.