19 Dec

Will the EIA’s Inventory Data Help Natural Gas Rise?

WRITTEN BY Rabindra Samanta

Inventories spread and natural gas prices

In the week ending on December 7, the inventories spread was -19.9%. The inventories spread is the difference between natural gas inventories and their five-year average. During this period, the inventories spread expanded by 30 basis points compared to the previous week.

Will the EIA’s Inventory Data Help Natural Gas Rise?

On December 13, the EIA (U.S. Energy Information Administration) reported the natural gas inventory data for the week ending on December 7.

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 December 13, the natural gas January futures have fallen 6.9%. In the past, a bearish weather forecast might have dragged natural gas prices, which we discussed in Part 1. During the same period, natural gas–weighted stocks Antero Resources (AR), Range Resources (RRC), Chesapeake Energy (CHK), and Gulfport Energy (GPOR) fell 11.8%, 13.3%, 17.8%, and 19.1%, respectively, and underperformed their peers.

On December 13–18, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) fell ~10% and ~6.3%, respectively. These ETFs hold natural gas–producer stocks.

Inventories could fall more

On December 20, the EIA is scheduled to release its natural gas inventory report for the week ending on December 14. Any fall by more than ~115 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 131 Bcf in natural gas inventories for last week, which would expand the negative inventories spread by another 40 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 this winter—a bullish factor for natural gas prices.

Latest articles

15 Jul

Will Amazon Prime Day 2019 Break 2018's Record?

WRITTEN BY Jitendra Parashar

This year, Amazon extended its Prime Day to 48 hours instead of the 36-hour sale in July 2018, making the 2019 event the longest Prime Day ever.

In a series of tweets on Monday, Trump today weighed in on China’s GDP growth, which came in at a 27-year low.

15 Jul

OrganiGram's Third-Quarter Earnings

WRITTEN BY Adam Jones

On Monday morning, OrganiGram's third-quarter earnings came in as a bit of a let-down. Here's why.

Trump is reportedly planning to increase the content of US-made steel in federal projects, which would be a lifeline for US steel companies.

Huawei is preparing for “extensive layoffs” in the US, which could put the US-China trade deal on the rocks.

With Q2's Netflix earnings just around the corner, here's what you can expect from the online streaming giant and the broader streaming space.