Oil and Gas Market: Bears Cheer Pessimistic Oversupply Sentiments
Natural gas stockpile data
On Thursday, October 15, 2015, the EIA (U.S. Energy Information Administration) published its natural gas stockpile report. It reported that the natural gas stockpile rose by 100 Bcf (billion cubic feet) to 3,733 Bcf for the week ending October 9, 2015. Likewise, the natural gas stockpile rose by 95 Bcf to 3,633 Bcf for the week ending October 2, 2015. The natural gas stocks rose due to mild weather and rising natural gas production.
Natural gas stockpile estimates
Market surveys estimated that the natural gas stockpile could rise between 93 Bcf and 94 Bcf for the week ending October 9, 2015. However, the better-than-expected rise in natural gas stocks put downward pressure on natural gas prices. Colder weather is expected during the next week. It could draw down the natural gas inventory.
Currently, the natural gas stockpile is 13.6% more than 3,286 Bcf in 2014. It’s also 4.7% more than the five-year average of 3,565 Bcf. The EIA released its STEO (Short-Term Energy Outlook) report on October 6, 2015. The report highlighted that natural gas stocks could total around 3,956 Bcf. This is 158 Bcf more than the five-year average. It’s the highest end-of-October level on record.
The record inventory and rising natural gas stockpile, despite the cold weather, could weigh on natural gas prices. Natural gas prices have lost more than 30% in the past year. The exponential fall in natural gas prices impacts natural gas producers like WPX Energy (WPX), Devon Energy (DVN), Comstock Resources (CRK), and Memorial Resource Development (MRD). These stocks account for 4.4% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These companies’ natural gas production mixes account for more than 40% of their total production.
The roller coaster ride of the natural gas market also impacts ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DB Energy ETF (DBE).
In the next part of this series, we’ll look at the natural gas rig count, so far, in October 2015.
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