Energy
Natural Gas Price at 8-Month High on Small Inventory Addition
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The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 65 billion cubic feet for the week ending June 3. Analysts were expecting a storage addition of around 77 billion cubic feet. The five-year average for the week is an injection of around 96 billion cubic feet, and last year’s storage addition for the week totaled 117 billion cubic feet. Natural gas inventories rose by 82 billion cubic feet in the week ending May 27.
Natural gas futures for July delivery traded down about 0.6% in advance of the EIA’s report, at around $2.45 per million BTUs, and traded near $2.55 after the data release. Last Thursday natural gas closed at $2.41 per million BTUs. The highest closing price for the past five trading days came Wednesday at $2.48 per million BTUs, after the contract had touched $2.50 for the first time since October 2015. The 52-week range for natural gas is $1.94 to $3.19. One year ago the price for a million BTUs was around $3.15.
The forecast through June 15 calls for rising temperatures across most of the country, sparking demand for electricity to power air conditioning. Demand for natural gas is expected rise from the low to moderate range. Natural gas currently generates about a third of U.S. electricity.
U.S. natural gas production has slowed down. The number of rigs drilling for natural gas fell by five last week, leaving the gas rig count at 82, down by 63% year over year. If producers can restrain themselves from overproducing, prices could conceivably remain above $2.50 per million BTUs, thanks to a combination of hot weather and smaller-than-normal injections into storage.
Stockpiles are about 29% above their levels of a year ago and 32% above the five-year average.
The EIA reported that U.S. working stocks of natural gas totaled about 2.972 trillion cubic feet, around 722 billion cubic feet above the five-year average of 2.250 trillion cubic feet and 660 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 2.312 trillion cubic feet for the same period a year ago.
Here’s how share prices of the largest U.S. natural gas producers reacting to this latest report:
Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded down about 0.2%, at $90.64 in a 52-week range of $66.55 to $91.30.
Chesapeake Energy Corp. (NYSE: CHK) traded down about 5.5% to $4.69. The stock’s 52-week range is $1.50 to $12.95. The company’s stock was downgraded to Sector Perform Thursday morning by RBC Capital Markets.
EOG Resources Inc. (NYSE: EOG) traded down about 0.5% to $84.90. The 52-week range is $57.15 to $91.15.
Furthermore, the United States Natural Gas ETF (NYSEMKT: UNG) traded up about 4.2%, at $7.76 in a 52-week range of $5.78 to $14.30.
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