US Natural Gas Inventories: Smallest Fall since 2015

Natural gas futures 

January US natural gas (UGAZ) (DGAZ) futures contracts rose 0.48% to $2.69 per MMBtu (million British thermal units) at 1:22 AM EST on December 15, 2017. Prices rose due to short covering. The Energy Select Sector SPDR ETF (XLE) fell 0.3% on December 14, 2017, which is influenced by oil and gas prices.

Similarly, the E-Mini S&P 500 (SPY) futures contracts for March delivery rose 0.12% to 2,659.25 at 1:22 AM EST on December 15, 2017.

US Natural Gas Inventories: Smallest Fall since 2015

US natural gas inventories 

The EIA released the weekly natural gas storage report on December 14, 2017. US natural gas inventories fell by 69 Bcf (billion cubic feet) or 1.8% to 3,626 Bcf on December 1–8, 2017, according to the EIA. The inventories also fell by 201 Bcf or 5.3% year-over-year.

A Reuters poll estimated that US natural gas inventories would have fallen by 60 Bcf on December 1–8, 2017. US natural gas (UNG) prices fell on December 14, 2017, due to a smaller withdrawal in US natural gas inventories compared to historical averages. It was also the smallest weekly withdrawal in natural gas inventories for this period of the year since 2015. For more on natural gas prices, read Part 1 of this series.

US natural gas (FCG) futures are near a ten-month low. They have fallen almost 25% year-to-date. Lower natural gas (GASL) prices have a negative impact on oil and gas producers (FENY) (FXN) like Rex Energy (REXX), Rice Energy (RICE), Exco Resources (XCO), and Antero Resources (AR).

Historical context  

US natural gas inventories’ five-year average withdrawal for this time of the year was at 78 Bcf. The inventories fell by 132 Bcf during the same week last year. However, the inventories rose by 2 Bcf for the week ending December 1, 2017.

Impact 

US natural gas inventories are 0.7% below their five-year average for the week ending December 8, 2017. They were 3.1% below their five-year average for the week ending November 17, 2017. Any increase in US natural gas inventories above their five-year average would weigh on natural gas (FCG) prices.

Next, we’ll discuss the US natural gas rig count.