Natural gas inventory
Inventories are a significant driver of commodity prices. In this part of our series, we’ll focus on inventory levels for natural gas. Further into the series, we’ll talk about its impact on natural gas prices and, ultimately, the effect on coal prices.
The EIA (Energy Information Administration) releases the estimate volume for natural gas stored in underground facilities on a weekly basis.
The EIA’s natural gas inventory figure for the week ended December 8 is 3,626 Bcf (billion cubic feet). This latest stockpile estimate is 69 Bcf lower than the 3,695 Bcf reported for the week ended December 1, which means a fall of nearly 2% on a week-over-week basis.
On a YoY (year-over-year) basis, the natural gas inventory also dropped. The reading is around 5.3% below the inventory level of 3,827 Bcf that was reported in 2016. Last week’s natural gas stockpile is within the historical five-year range, just 27 Bcf below the five-year average of 3,653.
The demand for natural gas has been high in the United States since the start of winter. However, supply has remained below the five-year average. The inventory was 1.0% and 0.7% below the five-year average for the weeks ending and December 1 and December 8, respectively. If US natural gas inventories surpass their five-year average, they will likely pressure natural gas prices.
Stronger natural gas prices would most likely drive utility companies like Consolidated Edison (ED) and Dominion Energy (D) away from natural gas toward coal.
This activity could help prominent coal (KOL) mining companies like Cloud Peak Energy (CLD), Alpha Natural Resources (ANRZQ), and Peabody Energy (BTU) achieve gains.
Next, let’s see how natural gas prices have fared this week.