5 Dec

Analyzing Natural Gas Inventory Levels

WRITTEN BY Rabindra Samanta

Inventories spread and natural gas prices

In the week ending on November 23, the inventories spread was -19.1%. The inventories spread is the difference between natural gas inventories and their five-year average. During this period, the inventories spread expanded by 50 basis points compared to the previous week.

Analyzing Natural Gas Inventory Levels

On November 29, the EIA (U.S. Energy Information Administration) reported the natural gas inventory data for the week ending on November 23.

Natural gas inventories

Natural gas prices are usually inversely related to the inventories spread. However, the relationship seems to be more biased toward a price downside when inventories rise above their five-year average. The market might be confident about having enough future supply instead of being concerned about demand getting out of hand.

Since November 29, natural gas January futures have fallen 4.1%. In the past, a milder weather forecast might have dragged natural gas prices. During the same period, natural gas–weighted stocks Range Resources (RRC), Chesapeake Energy (CHK), Antero Resources (AR), and Southwestern Energy (SWN) have fallen 1.8%, 4.6%, 5.9%, and 8.3%, respectively, and underperformed their peers.

On November 29–December 4, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) fell ~1.7% and ~0.9%, respectively. These ETFs hold natural gas–producer stocks.

Inventories could fall more

On December 7, the EIA is scheduled to release its natural gas inventory report for the week ending on November 30. Any fall by more than ~47 Bcf (billion cubic feet) could cause the inventories to expand more into the negative territory, which could be a positive development for natural gas prices. Reuters analysts expect a draw of 73 Bcf in natural gas inventories for last week, which would expand the negative inventories spread by another 60 basis points.

As long as inventories are at a double-digit deficit to their five-year average in percentage terms, natural gas’s undersupply concerns could increase for this winter season—a bullish factor for natural gas prices.

Latest articles

25 Jun

Gold Breaches $1,400: What’s the Next Stop?

WRITTEN BY Anuradha Garg

Gold is now trading close to a six-year high following the Fed’s dovish pivot at its June policy meeting. After being range-bound for the last five years, gold has finally broken out and its outlook is bullish.

Shares of the J.M. Smucker Company (SJM) are up 29.8% year-to-date as of June 24 and have outperformed the broader markets. The company's acquisition of Ainsworth Pet Nutrition and its focus on high-growth categories via divestitures have supported its stock so far this year.

On June 25, General Motors (GM), America’s largest auto company, announced its plan to invest $20 million into its Arlington Assembly plant in Texas, according to Reuters. With the new investment, the company aims to upgrade its equipment before launching its full-size SUVs.

Shares of high-growth technology company ServiceNow (NOW) have gained close to 16.0% since April 2019. It's gained over 60.0% since the start of 2019. It also had an encouraging run in 2018, when it gained 32.0% in market value.

25 Jun

Ford to Announce Q2 US Sales on July 3: What to Expect

WRITTEN BY Jitendra Parashar

Earlier today, Ford (F) said that it would announce its second-quarter US sales data on July 3. In the first quarter, the company reported a 1.6% YoY decline in its US sales to 590,249 vehicle units. During the first quarter, Ford’s truck sales rose by 4.1%, and its SUV sales went up by 5.0% on a YoY basis.

On June 25, Credit Suisse initiated coverage on Chipotle Mexican Grill with an “outperform” rating and a target price of $870—a return potential of 20.1% from its stock price of $724.13 on June 24.

172.31.71.127