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EIA Reports Significant Build in US Natural Gas Inventories

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US natural gas inventories 

On June 21, the EIA released its natural gas storage report. It reported that US natural gas inventories rose by 91 Bcf (billion cubic feet) to 2,004 Bcf from June 8 to 15. However, inventories were 757 Bcf or 27% lower than a year ago. Inventories are at their lowest level since 2014 for this time of the year.

A Reuters survey had estimated that US natural gas inventories would have risen by 85 Bcf from June 8 to 15. Lower natural gas inventories for this time of year since 2014 and warmer-than-usual weather forecasts supported natural gas prices on June 21 despite the larger-than-expected rise in inventories for the previous week.

July US natural gas futures contracts rose 0.4% to $2.97 per MMBtu (million British thermal units) on June 21. The First Trust Natural Gas ETF (FCG) aims to track the performance of an index of mostly companies mainly involved in natural gas exploration and production. FCG fell 1.88% to $22.58.

Marathon Oil (MRO)Concho Resources (CXO), Matador Resources (MTDR), and SM Energy (SM) fell 5.4%, 5.3%, 5%, and 4.9%, respectively. These stocks saw some of the biggest losses in FCG’s holdings that day. These stocks account for ~10.7% of FCG’s holdings.

Historical context 

The five-year average change in US natural gas inventories during this period of the year is an increase of 83 Bcf. Inventories had risen by 63 Bcf during the same week in 2017. US natural gas inventories increased by 96 Bcf from June 1 to 8, 2018.

Impact  

For the week ended June 15, US natural gas inventories were ~20% below their five-year average, which is bullish for natural gas prices. However, a rise in natural gas inventories towards the five-year average could weigh on natural gas prices.

Next in this series, we’ll analyze US natural gas production.

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