Natural Gas Price Rises Following Unusual Storage Withdrawal

Energy

Published: August 4, 2016 10:50 am

Last Updated: January 13, 2020 4:55 am

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 6 billion cubic feet for the week ending July 29. Analysts surveyed by Reuters were expecting a storage addition of around 2 billion cubic feet. The five-year average for the week is an injection of around 54 billion cubic feet, and last year’s storage addition for the week totaled 41 billion cubic feet. Natural gas inventories rose by 17 billion cubic feet in the week ending July 15.

Natural gas futures for September delivery traded up about 0.4% in advance of the EIA’s report, at around $2.85 per million BTUs, and traded near $2.88 after the data release. Natural gas closed at $2.84 per million BTUs on Wednesday, after dropping from five-day high of $2.91 last Friday. The 52-week range for natural gas is $2.01 to $3.09. One year ago the price for a million BTUs was around $3.08.

A storage drawdown during the gas injection season is practically unheard of. A combination of hot weather and reduced production are primarily responsible for the decrease. Gas producers have been cutting production in an effort to reduce the amount of gas in storage when the heating season begins in November so that gas prices will improve.

High temperatures have dominated across the Lower 48 this week and are expected to push into the heavily populated northeastern United States this weekend, driving up demand for electricity to power air conditioning. Somewhat cooler temperatures are forecast early next week in the northeast, but high temperatures are expected elsewhere across the country. Overall demand is expected to be high for the next seven days.

Stockpiles remain about 13% above their levels of a year ago and about 16% above the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.288 trillion cubic feet, around 464 billion cubic feet above the five-year average of 2.824 trillion cubic feet and 389 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 2.899 trillion cubic feet for the same period a year ago.

Here’s how share prices of the largest U.S. natural gas producers reacted to this latest report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded down about 0.3%, at $87.25 in a 52-week range of $66.55 to $95.55.

Chesapeake Energy Corp. (NYSE: CHK) traded down about 4.5% to $5.29. The stock’s 52-week range is $1.50 to $9.55. Chesapeake just reported quarterly earnings that disappointed investors.

EOG Resources Inc. (NYSE: EOG) traded up about 0.1% to $82.47. The 52-week range is $57.15 to $89.52.

Furthermore, the United States Natural Gas ETF (NYSEMKT: UNG) also traded up about 0.1%, at $8.50 in a 52-week range of $5.78 to $14.06.

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