Natural gas inventories rose by 2 Bcf (billion cubic feet) for the week ending December 1. The market expected a fall by 5 Bcf. Natural gas inventories were at 3,695 Bcf in the same week, according to EIA (U.S. Energy Information Administration) data on December 7, 2017. On December 7–12, 2017, natural gas January 2018 futures fell 3.1%.
Natural gas inventories lower than their five-year average level, or the negative “inventories spread,” could support natural gas prices. If the negative inventories spread contracts or flips into positive territory, natural gas prices could suffer.
In the week ending December 1, the inventories spread was at -1%—a week ago, the inventories spread was at -2.8%. Earlier, we discussed the fall in natural gas prices since the announcement of the inventory data on December 7, 2017.
What investors should know
For the inventories spread to expand more into negative territory, the natural gas inventory level should be lower than 3,618 Bcf for the week ending December 8, 2017. In other words, the fall should be greater than 77 Bcf. However, the market expects a fall of just 55 Bcf. On December 14, 2017, the EIA will announce the natural gas inventory data.
Natural gas–weighted stocks like WPX Energy (WPX), Gulfport Energy (GPOR), and Antero Resources (AR) might not capture the possible downturn in natural gas prices. In fact, energy stocks tend to follow crude oil closer. As a result, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) could be relatively immune to changes in natural gas prices.