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Natural Gas Inventories Could Help US Natural Gas Prices

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Natural gas inventories

On January 4, 2018, the EIA will release the US natural gas inventories report. A Reuters poll estimates that US natural gas inventories could have fallen by 204 Bcf (billion cubic feet) on December 22–29, 2017. US natural gas inventories fell by 76 Bcf during the same week a year ago. The five-year average withdrawal for this period of the year was at 99 Bcf.

A larger-than-expected withdrawal in US natural gas inventories compared to historical averages would help natural gas (UNG) (UGAZ) (DGAZ) prices this week. For more on natural gas price drivers, read Part 1 of this series.

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EIA’s natural gas inventories for the week ending December 22

On December 28, 2017, the EIA released the US natural gas inventories report for the week ending December 22, 2017. The EIA estimated that US natural gas inventories fell by 112 Bcf (billion cubic feet) or 3.3% to 3,332 Bcf on December 15–22, 2017. The inventories also fell by 62 Bcf or 1.8% year-over-year.

A Reuters survey estimated that US natural gas inventories would have fallen by 113 Bcf on December 15–22, 2017. The fall in US natural gas inventories was in line with the market expectation, which supported natural gas prices on December 28, 2017. February US natural gas (UNG) (BOIL) futures contracts rose 6.7% to $2.91 per MMBtu (million British thermal units) on December 28, 2017. Cold winter forecasts in January 2018 and rising demand and exports also supported natural gas prices.

Natural gas (FCG) futures were near a four-week high. Higher natural gas (GASL) prices favor energy producers (FENY) (IYE) like Matador Resources (MTDR), Southwestern Energy (SWN), and Gulfport Energy (GPOR).

Impact 

US natural gas inventories were 0.7% below their five-year average for the week ending December 8, 2017. They were 2.5% below their five-year average for the week ending December 22, 2017. Any decrease in US natural gas inventories is bullish for natural gas (UNG) prices. In contrast, any rise in US natural gas inventories above the five-year average would weigh on natural gas (UGAZ) prices.

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

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