US Natural Gas Inventories Fell for 16 Consecutive Weeks
Behind the Natural Gas Rally: Why the Recent Rise from the Depths?
US natural gas inventory
The EIA (US Energy Information Administration) released its weekly natural gas inventory report on March 17, 2016, and reported that US natural gas inventory fell by 1 Bcf (billion cubic feet) to 2,478 Bcf for the week ended March 11, 2016, compared with previous week. Market surveys estimated a decline of 2 Bcf for this period. Natural gas withdrawal was at 88 Bcf for the same period in 2015.
The five-year seasonal natural gas withdrawal during this period of the year was 81 Bcf. But natural gas prices rallied despite the lower-than-expected fall in natural gas inventories on March 17, 2016. (Refer to Part 1 of this series for more on the latest natural gas price movement.)
US natural gas inventory by region
The EIA divides the US into five storage regions—East, Midwest, Mountain, Pacific, and South Central. The weekly natural gas inventory fell by 12 Bcf to 464 Bcf and by 10 Bcf to 587 Bcf in the East and Midwest Us regions, respectively, for the week ended March 11 over the previous week.
By contrast, natural gas inventory rose by 19 Bcf to 1,024 Bcf in the South Central region for the same period. Natural gas inventory in the Mountain and Pacific regions rose by 1 Bcf to 146 Bcf and 258 Bcf, respectively, for the week ended March 11 over the previous week.
Impact
This means that US natural gas inventories are 67% higher than the same period in 2015. They’re also 48% higher than the five-year average of 1,671 Bcf. High natural gas inventories could limit the upside for natural gas prices. Remember, as well, that lower natural gas prices affect natural gas exploration and production companies like Rice Energy (RICE), QEP Resources (QEP), Cabot Oil & Gas (COG), EXCO Resources (XCO), Devon Energy (DVN), and Gulfport Energy (GPOR).
Volatility in natural gas and oil prices also affects ETFs and ETNs like the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the Direxion Daily Energy Bull 3x ETF (ERX), and the Fidelity MSCI Energy ETF (FENY).
Now let’s analyze the latest update on natural gas rig counts.
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