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Smaller Withdrawal in Natural Gas Inventories Pressures Prices

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Natural gas futures  

March US natural gas futures contracts rose 1.7% to $2.90 per MMBtu (million British thermal units) at 1:15 AM EST on February 2, 2018. Prices rose due to short covering. Moves in gas prices impact the Guggenheim S&P Equal Weight Energy ETF (RYE) and the iShares Global Energy ETF (IXC). These ETFs have exposure in US energy companies.

The E-Mini S&P 500 (SPY) futures contracts for March delivery fell 0.18% to 2,817.5 at 1:15 AM EST on February 2, 2018.

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Natural gas inventories estimates  

On February 1, 2018, the EIA released its weekly US natural gas inventories report. US natural gas inventories fell by 99 Bcf (billion cubic feet) or 4.4% to 2,197 Bcf on January 19–26, 2018, according to the EIA. The inventories also declined by 526 Bcf or 19% year-over-year.

A Reuters poll estimated that US natural gas inventories could have declined by 104 Bcf on January 19–26, 2018. The less-than-expected withdrawal in natural gas inventories pressured gas prices on February 1, 2018. Natural gas prices fell 4.6% to $2.85 per MMBtu on February 1, 2018.

Lower energy prices are bearish for oil and gas producers like Gulfport Energy (GPOR), EQT (EQT), Ultra Petroleum (UPL), and Rex Energy (REXX).

Historical context 

US natural gas inventories fell by 96 Bcf during the same week a year ago. The five-year average natural gas withdrawal for this period of the year was at 160 Bcf. Inventories fell by 288 Bcf on January 12–19, 2018.

Impact 

US natural gas inventories have fallen by 1,803 Bcf or 45.7% since the peak in November 2016. Inventories are also 16.2% below their five-year average. If the momentum continues, it could be bullish for natural gas prices.

On the other hand, a rise in US natural gas inventories above the five-year average could weigh on natural gas prices.

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

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