uploads/2017/01/ng-inventory-by-region-1.png

Will US Natural Gas Inventories Impact Natural Gas Prices in 2017?

By

Updated

US natural gas inventories by region  

The EIA (U.S. Energy Information Administration) divides the US into the following five natural gas storage regions:

  • East
  • Midwest
  • Mountain
  • Pacific
  • South Central

Below are the movements in natural gas inventories for the storage regions from December 16–23, 2016.

  • East – fell 53 Bcf (billion cubic feet) to 757 Bcf
  • Midwest – fell 61 Bcf to 946 Bcf
  • Mountain – fell 13 Bcf to 217 Bcf
  • Pacific – fell 19 Bcf to 283 Bcf
  • South Central – fell 91 Bcf to 1,157 Bcf
Article continues below advertisement

Natural gas inventories and prices 

US natural gas inventories were at 3,360 Bcf for the week ending December 23, 2016. It’s 2.3% lower than the five-year average, as we discussed in the previous part of this series. Falling US natural gas inventories during the winter season could support US natural gas (FCG) (BOIL) (UNG) (GASL) prices, particularly if demand is strong.

The EIA estimates that US natural gas inventories will be at 1,940 Bcf by the end of March 2017—20.0% higher than the five-year average. High US natural gas inventories at that time of the year could pressure natural gas prices in 2017. Inventories start to build again at the end of the winter. For more on inventories, read the previous part of this series.

Lower natural gas prices can have a negative impact on oil and gas producers’ profitability such as Antero Resources (AR), Southwestern Energy (SWN), EXCO Resources (XCO), WPX Energy (WPX), and Range Resources (RRC).

Moves in crude oil and natural gas prices impact ETFs and ETNs such as the VelocityShares 3X Long Natural Gas ETN (UGAZ), the Direxion Daily Natural Gas Related Bull 3X ETF (GASL), the ProShares Ultra Bloomberg Crude Oil (UCO), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the Fidelity MSCI Energy ETF (FENY), the United States Natural Gas ETF (UNG), 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. We’ll discuss the US natural gas rig count in the next part.

Advertisement

More From Market Realist