Yahoo Finance How Natural Gas Inventory Impacts Natural Gas Prices
Natural Gas Market: Key Factors that Drive Natural Gas Prices
US natural gas inventory
The EIA (U.S. Energy Information Administration) released its weekly natural gas inventory report on April 28, 2016. The government agency reported that the US natural gas inventory rose by 73 Bcf (billion cubic feet) to 2,557 Bcf in the week ended April 22, 2016, compared with previous week.
The Wall Street Journal survey projected that natural gas inventories could have risen by 71 Bcf for this period. The five-year average natural gas injection during this period is 52 Bcf. Natural gas inventories added 84 Bcf for the corresponding period in 2015.
The larger-than-expected rise in natural gas inventory pushed June natural gas futures lower. For more on natural gas prices, please read the previous part of this series.
US natural gas inventory by region
The EIA divides the US into five storage regions:
East region
Midwest region
Mountain region
Pacific region
South Central region
The South Central, Midwest, and Eastern regions contribute to the majority of the US natural gas stocks. Natural gas stocks rose by 25 Bcf to 1,140 Bcf in the South Central region in the week ended April 22, 2016, compared with previous week. The natural gas inventory rose by 23 Bcf to 431 Bcf in the East region for the same period.
In the Midwest region, gas stockpiles rose by 16 Bcf to 554 Bcf for the same period. The natural gas stockpile in the Mountain and Pacific regions rose slightly by 3 Bcf to 155 Bcf and by 6 Bcf to 277 Bcf, respectively, for the same period.
Impact
Total US natural gas inventories are 52% higher than in the corresponding period in 2015. They are also 48% higher than the five-year average for this time of year. The high natural gas inventory could limit the upside potential for natural gas prices. The US natural gas rig count and production also play a key role in influencing natural gas prices. To learn more, please read the next two parts of the series.
The uncertainty in natural gas prices impacts oil and gas producers like EXCO Resources (XCO), Ultra Petroleum (UPL), Hess (HES), and Gulfport Energy (GPOR). It also impacts ETFs and ETNs like the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the First Trust ISE-Revere Natural Gas ETF (FCG), and the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL).
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