Natural Gas Prices Strengthen on Inventory Build, but the Outlook Is Weaker

Natural gas futures were trading down about 1.7% in advance of the EIA’s report, at around $3.90 per million BTUs, and ticked up to $3.92 immediately following the report. Natural gas futures have risen by nearly $0.20 per million BTUs since last week.

Stockpiles are about 11.4% below their levels of a year ago and about 12.5% below the five-year average. The rise in U.S. stockpiles is still on course for a record April through October injection record. The start of the heating season is still expected to see U.S. stockpiles at around 3.55 trillion cubic feet, the lowest level since 2008 but still adequate. Last year’s injection season ended with 3.8 trillion cubic feet in inventory.

Late last week Moody’s Investor Services cut its price assumptions on oil and natural gas through the end of 2015. The ratings agency will now use $90 a barrel for Brent crude, $85 a barrel for West Texas Intermediate (WTI) crude and $3.75 per million BTUs for natural gas. That is a drop of $5 a barrel for both benchmark crudes and $0.50 per million BTUs of natural gas. Moody’s will use the new price assumptions in making its ratings decisions.

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Natural gas prices are getting a boost now from shutdowns at nuclear power plants that are refueling. Nuclear generation is down about 4.2% this month, according to a report at Bloomberg.

The EIA reported that U.S. working stocks of natural gas totaled 2.99 trillion cubic feet, about 386 billion cubic feet below the five-year average of 3.41 trillion cubic feet. Working gas in storage totaled 3.37 trillion cubic feet for the same period a year ago. Natural gas inventories continue to rise, but remain well below the bottom of the five-year range.

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

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, was down about 0.7%, at $95.12 in a 52-week range of $84.79 to $104.76.

Chesapeake Energy Corp. (NYSE: CHK) was down about 1.3%, at $23.63 in a 52-week range of $22.63 to $29.92.

EOG Resources Inc. (NYSE: EOG) was down 1.7% to $100.40. The 52-week range is $78.01 to $118.89.

The United States Natural Gas ETF (NYSEMKT: UNG) was up 0.2%, at $21.22 in a 52-week range of $16.91 to $27.89.

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