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Larger Drop in US Natural Gas Inventories Helped Gas Prices

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US natural gas inventories  

The EIA (U.S. Energy Information Administration) released its weekly natural gas storage report on April 12, 2018. The EIA reported that US natural gas inventories declined by 19 Bcf (billion cubic feet) to 1,335 Bcf on March 30–April 6, 2018. The inventories also declined by 725 Bcf or 35% from a year ago.

A Reuters poll estimated that US natural gas inventories could have declined by 14 Bcf on March 30–April 6, 2018. The larger-than-expected withdrawal in US natural gas inventories supported natural gas prices on April 12, 2018. Prices rose 0.4% to $2.68 per MMBtu (million British thermal units) on April 12, 2018.

The United States Natural Gas ETF (UNG) aims to track active natural gas futures. UNG rose 0.7% to $22.19 on April 12, 2018. The First Trust Natural Gas ETF (FCG) aims to track the performance of the ISE-Revere Natural GasTM Index. FCG fell 0.6% to $21.07 on April 12, 2018.

UNG and FCG rose ~0.5% and ~2.5%, respectively, on April 5–12, 2018, while natural gas prices rose 0.4% during the same period.

The Vanguard Energy ETF (VDE) and the Energy Select Sector SPDR ETF (XLE) increased ~3% on April 5–12, 2018. VDE aims to track the performance of an index of energy stocks. XLE aims to track the performance of the Energy Select Sector Index.

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Historical context 

The five-year average change in US natural gas inventories during this period of the year is a rise of 9 Bcf. The inventories also increased by 9 Bcf during the same week in 2017. US natural gas inventories dropped by 29 Bcf on March 23–30, 2018.

Impact 

US natural gas inventories were 21.9% below their five-year average, which is bullish for natural gas prices. An increase in natural gas inventories towards the five-year average could weigh on natural gas prices.

Next, we’ll discuss US natural gas production.

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