EIA’s natural gas inventories 

The EIA (U.S. Energy Information Administration) released its US natural gas storage report on August 31, 2017. It reported that US natural gas inventories rose by 30 Bcf (billion cubic feet) to 3,155 Bcf on August 18–25, 2017. Inventories rose 1% week-over-week but fell 7% or by 239 Bcf year-over-year.

A market survey estimated that inventories would have risen by 32 Bcf on August 18–25, 2017. US natural gas (UGAZ) (BOIL) prices rose on August 31, 2017, due to a lower-than-expected rise in natural gas inventories—among other factors that we discussed in Part 1.

Natural gas prices are near a five-week high. Higher natural gas prices have a positive impact on natural gas producers’ earnings like Gulfport Energy (GPOR), Newfield Exploration (NFX), Southwestern Energy (SWN), and Memorial Resources (MRD).

Will US Natural Gas Inventories Fall below the 5-Year Average?

Historical context 

US natural gas inventories rose by 51 Bcf for the same period in 2016. The five-year average rise for US natural gas inventories for this period of the year is 67 Bcf. US natural gas inventories rose by 43 Bcf on August 11–18, 2017.

US natural gas inventories rose less than the historical averages on August 18–25, 2017, which supported US natural gas prices on August 31, 2017.

Impact  

US natural gas inventories were 21% above their five-year average in March 2017. They were 0.3% above their five-year average for the week ending August 25, 2017.

It suggests that US natural gas inventories are rebalancing towards historical average levels. Inventories have fallen ~22% from their peak. If the momentum continues, US natural gas inventories could fall below the five-year average.

A fall below the five-year average is bullish for natural gas prices. It would support US natural gas (DGAZ) (UNG) prices. Higher natural gas prices have a positive impact on natural gas producers like Gulfport Energy and Memorial Resources.

In the next part, we’ll discuss how US natural gas rigs impact natural gas prices.

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