Natural gas inventory
Commodity prices are dependent on demand and supply. If demand is high but supply remains constant, prices will rise since there will be more customers chasing each unit of the commodity. Likewise, if supply is more for a certain level of demand, it means the commodity is easily available and prices could drop. So natural gas inventory data helps investors get an idea about natural gas prices.
The EIA (US Energy Information Administration) published the latest natural gas inventory report on Thursday, October 19, 2017, for the week ended October 13. The latest natural gas inventory is 3,646 Bcf (billion cubic feet), which is higher than 3,595 Bcf posted for the week ending October 6, 2017.
However, the storage amount is down 4.7% compared to 3,825 Bcf during the corresponding week in 2016 and down by 1.0% compared to the reported five-year average of 3,681 Bcf.
Impact on coal
Natural gas is stored underground to manage peak demand during the winter season. Inventory levels lower than the five-year average may have a positive impact on natural gas prices. An increase in natural gas prices positively affects thermal coal (KOL) producers because it encourages utilities (XLU) to use coal instead of natural gas.
Next, let’s look at whether last week’s supply has impacted natural gas prices.