Why US Natural Gas Inventories Fell below the 5-Year Average

On October 13, the US Energy Information Administration (or EIA) released its weekly US natural gas inventory report. It estimates that US natural gas inventories rose by 87 Bcf (billion cubic feet) or 2.5% to 3,595 Bcf between September 29 and October 6. However, inventories are down 4.4% or by 164 Bcf from the same period in 2016.

The market anticipated that US natural gas inventories would have risen by 82 Bcf between September 29 and October 6. Natural gas (UNG)(DGAZ) prices rose on October 12 despite the larger-than-expected rise in natural gas inventories. We covered the bullish drivers that likely caused the rise in Part 1 of this series.

Moves in natural gas (UGAZ)(BOIL) prices impact natural gas exploration and production companies (XLE)(VDE) like Rex Energy (REXX), Cabot Oil & Gas (COG), and Antero Resources (AR).

The five-year average US natural gas inventory addition for this time of year is 87 Bcf. Inventories rose by 79 Bcf for the same period in 2016. US natural gas inventories rose by 42 Bcf for the week ending September 29, 2017.

US natural gas inventories were 21% above their five-year average in March 2017. They fell below their five-year average by 0.2% for the week ending October 6, 2017. US natural gas inventories are rebalancing toward historically average levels, which could support US natural gas (GASL)(BOIL) prices.

Next in this series, we’ll analyze how US natural gas rigs impact natural gas prices.