Natural Gas Drawdown Slows, Prices Slip Too

Energy

Published: February 27, 2014 10:55 am

Last Updated: April 28, 2020 2:18 am

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 95 billion cubic feet for the week ending February 21. That compared with an expected drop of 102 billion to 106 billion cubic feet anticipated by analysts. Natural gas futures prices were trading about 0.3% higher in advance of the EIA’s report, at around $4.55 per million BTUs, and slipped to around $4.49 immediately following the report.

The March natural gas futures contract expired Wednesday at $4.855 per million BTUs, down from more than $6.15 just a week ago, a drop of about 20%. The April contract fell even lower Thursday morning to $4.47 in overnight electronic trading on the Nymex. Unusually cold weather will continue through next week in the Midwest, but the Northeast looks like it may catch a break from subzero temperatures.

As natural gas in storage drops toward 1 trillion cubic feet, we should note that this winter’s demand on storage has been the fastest on record. More than 2.4 trillion cubic feet has already been drawn from the nation’s supply, and there could be additional large draws throughout the month of March and even into April. This week’s drawdown was barely a third of the previous week’s draw of 250 billion cubic feet, and well below the five-year average draw of 125 billion cubic feet.

At current withdrawal rates, the nation’s natural gas supply will fall below a trillion cubic feet in another two or maybe three weeks. Expect natural gas markets to turn sharply upward on the news.

The EIA reported that U.S. working stocks of natural gas totaled 1.35 trillion cubic feet, about 71 billion cubic feet below the five-year average of 2.06 trillion cubic feet. Working gas in storage totaled 2.25 trillion cubic feet for the same period a year ago. Natural gas inventories are dropping further below the bottom of the five-year range.

Here is how stocks of the largest U.S. natural gas producers reacted to this report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, was up about 0.1% to $95.89, in a 52-week range of $84.79 to $101.74.

Chesapeake Energy Corp. (NYSE: CHK) was up 0.7%, at $25.80 in a 52-week range of $18.21 to $29.06.

EOG Resources Inc. (NYSE: EOG) was up 0.1%, at $186.66. The 52-week range is $112.05 to $188.41.

The U.S. Natural Gas Fund (NYSEMKT: UNG) was up about 0.4%, at $25.21 in a 52-week range of $16.59 to $27.89. The Market Vectors Oil Services ETF (NYSEMKT: OIH) was down 0.4%, at $47.88 in 52-week range of $39.42 to $51.11. The first fund tracks spot prices; the second includes major drillers and services companies.

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