The U.S. Energy Department's weekly inventory release showed a smaller-than-expected increase in natural gas supplies. But despite the bullish inventory news, natural gas prices stayed down as production remains plentiful and is expected to outpace demand for most part of 2015.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays.
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states rose by 89 billion cubic feet (Bcf) for the week ended Jun 12, 2015, below the guided range (of 91–95 Bcf gain) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Financial Inc. The increase – the eleventh successive weekly injection – was also less than last year’s build of 112 Bcf though it exceeded the 5-year (2010–2014) average addition of 87 Bcf for the reported week.
Following past week’s climb, the current storage level – at 2.433 trillion cubic feet (Tcf) – is up 730 Bcf (42.9%) from last year and is 46 Bcf (1.9%) above the five-year average.
Bullish Data Fails to Lift Prices
Despite the lower-than-expected injection of natural gas into storage, prices are currently hovering around the lowly $2.8 per million Btu (MMBtu) mark. With production from the major shale plays remaining strong and the commodity’s demand failing to keep pace with this supply surge, natural gas prices have been held back. Even the summer cooling demand on the back of warm weather has been of little help.
Gas-Weighted Companies to Suffer
The price weakness translates into limited upside for natural gas-weighted companies like Chesapeake Energy Corp. CHK, Range Resources Corp. RRC, QEP Resources Inc. QEP, EOG Resources Inc. EOG and Devon Energy Corp. DVN.
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