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What to Expect from US Natural Gas Inventories

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EIA’s natural gas inventories  

On August 10, 2017, the EIA (U.S. Energy Information Administration) released its weekly US natural gas inventory report. It reported that US natural gas inventories rose by 28 Bcf (billion cubic feet) or 1% to 3,038 Bcf between July 28, 2017, and August 4, 2017. US natural gas inventories fell 8.3% or by 275 Bcf from the same period in 2016.

A market survey estimated that inventories would rise by 37 Bcf between July 28, 2017, and August 4, 2017. A less-than-expected fall in US natural gas inventories supported US natural gas (UNG) (UGAZ) (DGAZ) futures on August 10, 2017. Higher natural gas prices have a positive impact on natural gas producers like Newfield Exploration (NFX), Cabot Oil & Gas (COG), Exco Resources (XCO), and Antero Resources (AR).

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US natural gas inventories by region  

Movements in natural gas inventories for the storage regions between July 28, 2017, and August 4, 2017, are as follows:

  • East: rose by 22 Bcf (billion cubic feet) to 673 Bcf
  • Midwest: rose by 17 Bcf to 771 Bcf
  • Mountain: rose by two Bcf to 202 Bcf
  • Pacific: fell by four Bcf to 289 Bcf
  • South Central: fell by nine Bcf to 1,103 Bcf

Impact 

US natural gas inventories are 2% above their five-year average for the week ending August 4, 2017. In March 2017, inventories were 21.0% above their five-year average, which suggests that US natural gas inventories are slowing. US natural gas inventories are down ~26% from their peak.

If the momentum continues, US natural gas inventories might fall below their five-year average in a couple of months. The EIA released its Short-Term Energy Outlook report on August 8, 2017. It estimates that US natural gas inventories might fall below their five-year average in early 2018. The fall in US natural gas inventories would likely benefit US natural gas prices.

In the next part, we’ll discuss whether the US natural gas rig count could pressure natural gas prices.

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