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Will US Natural Gas Inventories Support Prices This Week?

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Jan. 8 2018, Updated 9:45 a.m. ET

Natural gas futures

US natural gas (UGAZ) (DGAZ) futures contracts for February delivery rose 1.5% to $2.83 per MMBtu (million British thermal units) at 1:19 AM EST on January 8, 2018. Similarly, the E-Mini S&P 500 (SPY) futures contracts for March delivery rose 0.07% to 2,744.5 during the same time.

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Natural gas inventories 

On January 11, 2018, the EIA will publish the US natural gas inventories report. A Reuters poll estimates that US natural gas inventories could have fallen by 332 Bcf (billion cubic feet) between December 29, 2017, and January 5, 2018. Inventories fell by 151 Bcf during the same period a year ago. The five-year average natural gas withdrawal for this period of the year was at 162 Bcf.

A larger-than-expected withdrawal in US natural gas inventories compared to historical and seasonal averages could support natural gas (UNG) (FCG) prices this week. Higher oil and natural gas (BOIL) prices benefit energy producers (XLE) (IYE) like Range Resources (RRC), Sanchez Energy (SN), Rice Energy (RICE), and Southwestern Energy (SWN).

EIA’s natural gas inventories for the week ended December 29 

On January 4, 2017, the EIA published the US natural gas inventories report for the week ending December 29, 2017. US natural gas inventories fell by 206 Bcf to 3,126 Bcf on December 22–29, 2017, according to the EIA. The inventories also fell 5.8% from a year ago.

Analysts expected that US natural gas inventories would fall by 221 Bcf on December 22–29, 2017. Natural gas prices fell 4.26% to $2.88 per MMBtu on January 4, 2018, due to a less-than-expected withdrawal in natural gas inventories. Mild winter forecasts also pressured natural gas (UNG) prices.

Impact  

US natural gas inventories were 5.8% below their five-year average for the week ending December 29, 2017. They were 0.7% below their five-year average for the week ending December 8, 2017. Any fall in US natural gas inventories is positive for natural gas (BOIL) prices. On the other hand, any increase in US natural gas inventories above the five-year average would pressure natural gas (DGAZ) prices.

Next, we’ll discuss US natural gas rigs.

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