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Smaller Build in US Natural Gas Inventories Supported Prices

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US natural gas inventories  

On August 2, the EIA (U.S. Energy Information Administration) released its weekly natural gas storage report. The EIA reported that US natural gas inventories increased by 35 Bcf (billion cubic feet) to 2,308 Bcf on July 20–27. However, the inventories fell ~23% year-over-year. The inventories were at the lowest level since 2014 for this period of the year.

A Reuters survey estimated that US natural gas inventories could have risen by 43 Bcf on July 20–27. The smaller-than-expected build in natural gas inventories supported natural gas prices on August 2.

US natural gas futures contracts rose 2.1% to $2.81 per MMBtu (million British thermal units) on August 2. The First Trust Natural Gas ETF (FCG) aims to track the performance of an index of companies mainly involved in natural gas exploration and production. FCG rose 0.6% to $23.16 on August 2.

WPX Energy (WPX), SM Energy (SM), NuStar Energy (NS), and Western Gas Partners (WES) rose 6.8%, 5.7%, 4.33%, and 4.25%, respectively, on August 2. These stocks were the top percentage gainers in FCG’s holdings on the same day. These stocks account for ~3% of FCG’s holdings.

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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 43 Bcf. The inventories increased by 18 Bcf during the same period in 2017. US natural gas inventories rose by 24 Bcf on July 13–20.

Impact 

For the week ending July 27, US natural gas inventories were ~20% below their five-year average, which is bullish for prices. However, a rise in natural gas inventories towards the five-year average could pressure natural gas prices.

Next, we’ll discuss US natural gas production.

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