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Slowing US Natural Gas Inventories: Bullish for 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 April 13, 2017. It reported that US natural gas inventories rose by 10.0 Bcf (billion cubic feet) to 2,061 Bcf between March 31, 2017, and April 7, 2017. Inventories rose 0.5% week-over-week but fell 16.8% YoY (year-over-year). The YoY fall in inventories is bullish for natural gas (GASL) (BOIL) (UNG) prices.

However, US natural gas inventories hit 4,047 Bcf for the week ending November 11, 2016—the highest level ever. Inventories fell 49% from their peak level. Changes in inventories impact natural gas prices. For more on natural gas prices and the weather, read Part 1 and Part 2 of this series.

An S&P Global Platts survey estimated that US natural gas inventories would have risen between 9 Bcf and 13 Bcf between March 31, 2017, and April 7, 2017.

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Natural gas (UGAZ) (DGAZ) prices rose on April 13, 2017, due to a less-than-expected rise in natural gas inventories compared to historical averages. The five-year average natural gas addition for this period is 12.0 Bcf. Natural gas inventories fell by 1.0 Bcf during the same period in 2016. They rose by 2.0 Bcf in the week ending March 31, 2017.

Volatility in natural gas prices impacts oil and gas producers’ profitabilities such as Range Resources (RRC), Rice Energy (RICE), WPX Energy (WPX), and Memorial Resource Development (MRD).

What’s the impact?  

For the week ending April 7, 2017, US natural gas inventories were 14.6% higher than their five-year average. They were 21.0% higher than their five-year average in early March 2017. Slowing inventories could support natural gas prices in 2Q17 and 2017.

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

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