Oil and Gas: Prices, Inventories, and Rig Counts in October
Natural gas inventory report
The EIA (U.S. Energy Information Administration) released its natural gas inventory report on October 22, 2015. The data showed natural gas inventory rose by 81 Bcf (billion cubic feet) to 3,814 Bcf for the week ended October 16, 2015. Similarly, natural gas stocks rose by 100 Bcf to 3,733 Bcf for the week ended October 9, 2015. The US natural gas inventory rose due to increasing natural gas production and a mild winter forecast.
Natural gas inventory consensus
Wall Street Journal surveys estimated that natural gas inventories could rise by 87 Bcf for the week ended October 16, 2015. Oversupply concerns overshadow the less-than-expected inventory increase. Natural gas stocks rose for the 29th straight week in that same period. Mild winter weather could lead to a weak demand for natural gas in the near term and negatively impact natural gas prices.
Natural gas stocks are currently 12.8% more than the 3,380 Bcf level in 2014. They are also 4.5% more than the 3,650 Bcf level. The EIA estimates that natural gas inventory 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.
Rising production and record natural gas stocks could continue to put pressure on natural gas prices. The mammoth fall in natural gas prices will put pressure on oil and gas producers such as Devon Energy (DVN), Gulfport Energy (GPOR), Comstock Resources (CRK), and Memorial Resource Development (MRD). These companies account for 4.7% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The natural gas production mix of these stocks is more than 40% of their production portfolio.
Uncertainty in the natural gas market also impacts ETFs such as the PowerShares DB Energy ETF (DBE) and the iShares US Oil & Gas Exploration & Production ETF (IEO).
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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