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Why US Natural Gas Inventories Have Fallen 33% from a Year Ago

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US natural gas inventories 

The EIA (U.S. Energy Information Administration) released its weekly natural gas inventories report on March 29, 2018. It reported that US natural gas inventories declined 63 Bcf (billion cubic feet) to 1,383 Bcf from March 16–23, 2018. Inventories fell 672 Bcf, or 32.7% year-over-year.

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Historical context

Analysts estimated earlier that US natural gas inventories could have fallen 70 Bcf from March 16–23, 2018. The five-year average decline in US natural gas inventories at this time of the year was 46 Bcf. Inventories fell 58 Bcf during the same week in 2017. The larger withdrawal in US natural gas inventories compared to historical averages during this time of the year supported natural gas prices on March 29, 2018. US natural gas prices rose 1.3% to $2.73 per MMBtu (million British thermal unit) on March 29, 2018.

The United States Natural Gas ETF (UNG) tracks natural gas futures. UNG rose 1.1% to $22.50 on March 29, 2018. The Vanguard Energy ETF (VDE) and the Energy Select Sector SPDR ETF (XLE) increased ~2.2% and ~2.1%, respectively, on March 29, 2018. VDE follows an index of energy stocks, while XLE follows the Energy Select Sector Index.

Impact

US natural gas inventories were 20% below their five-year average, which is bullish for natural gas prices. Cold weather in the next few weeks could lead to more heating demand and support natural gas prices.

Next, we’ll take a look at US natural gas rigs.

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