Natural Gas Inventories Rise, Price Falls Sharply

The U.S. Energy Information Administration (EIA) today reported the U.S. natural gas stocks rose by a total of 28 billion cubic feet, higher than the 23 billion cubic feet that analysts were expecting. Natural gas futures prices fell about 3% in advance of the EIA’s report, and continue to fall now that the report is out.

The EIA reported that U.S. working stocks of natural gas totaled 3.22 trillion cubic feet, about 407 billion cubic feet higher than the five-year average of 2.81 trillion cubic feet. Working gas in storage totaled 2.75 trillion cubic feet for the same period a year ago.

U.S. natural gas inventories are about 17% higher than they were a year ago and nearly 15% higher than the five-year average. Both figures are lower than they were a week ago.

Natural gas futures prices are about 62% higher than they were at their low point of $1.90 per thousand cubic feet in April of this year. The slowing rise in storage builds have raised hope that record-high storage levels can be reduced before winter withdrawals begin in November. Storage injections need to fall by about 240 billion cubic feet in order not to reach the storage maximum of 4.1 trillion cubic feet by the end of October. That storage overhang could continue to put pressure on natural gas prices.

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, is down about 0.6% at $86.37, in a 52-week range of $67.03 to $87.94. Chesapeake Energy Corp. (NYSE: CHK) is down about 2.3% at $18.25, in a 52-week range of $13.32 to $33.87. EOG Resources Inc. (NYSE: EOG) is about 3% lower at $97.42, in a 52-week range of $66.81 to $119.97.

The U.S. Natural Gas Fund (NYSEMKT: UNG) is down about 4.8% at $20.61 in a 52-week range of $14.25 to $41.84. The Market Vectors Oil Services ETF (NYSEMKT: OIH) is down about 1.6% at $39.16 in a 52-week range of $32.54 to $45.14. The first fund tracks spot prices; the second includes major drillers and services companies.

Paul Ausick