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Weekly Natural Gas Futures End Flat After In-Line EIA Data

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The U.S. Energy Department's weekly inventory release showed that natural gas supplies surged as per expectations. With no surprises in the report, plus the prospect of tepid weather-related consumption, the U.S. benchmark showed no change last week.

Let us see how the natural gas situation looks like after the U.S. Energy Department's latest weekly inventory release:

EIA Reports a Build Fairly in Line With Expectations

Stockpiles held in underground storage in the lower 48 states rose by 71 billion cubic feet (Bcf) for the week ended May 7 compared to the guidance of a 70 Bcf addition per the analysts surveyed by S&P Global Platts. However, the increase was below last year’s addition of 104 Bcf for the reported week and the five-year (2016-2020) average net build of 82 Bcf.

The latest injection puts total natural gas stocks at 2,029 billion cubic feet (Bcf), which is 378 Bcf (15.7%) below the 2020 levels at this time and 72 Bcf (3.4%) lower than the five-year average.

Total supply of natural gas averaged 96.7 Bcf per day, edging up 0.6% on a weekly basis due to an increase in dry production and higher shipments from Canada.

Meanwhile, daily consumption rose 5.1% to 89.1 Bcf from 84.8 Bcf in the previous week, buoyed by stronger demand from the residential/commercial and industrial sectors, plus higher LNG exports to Mexico, partly offset by a lower power burn.

Natural Gas Settles Flat

Natural gas prices remained essentially unchanged last week, following the expected inventory build. Futures for June delivery ended Friday at $2.96 per million British thermal units (MMBtu) on the New York Mercantile Exchange, same as the previous week’s closing. The lack of movement in the price of natural gas is the result of mild weather predictions throughout most of the United States in the days ahead, which would translate into tepid demand for the fuel.

Wrap-Up

As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. The latest models are anticipating moderate temperature-driven consumption, after which prices have hardly moved.

With winter drawing to a close and the so-called “shoulder season” of typically low natural gas demand in the spring underway, prices could face more downside risks than upside potential. While growing LNG export and strong deliveries to Mexico amid flat production are providing some support to the prices, it will be weather conditions across the United States that will dictate the energy commodity’s future.

The lingering uncertainty over the fuel means that most natural gas-focused companies carry a Zacks Rank #3 (Hold). As a result, investors should preferably wait for a better entry point before buying shares in EQT Corporation EQT, Range Resources RRC, Comstock Resources CRK, Antero Resources AR, Southwestern Energy Company SWN, Cabot Oil & Gas Corporation COG etc.

If you are still looking for near-term natural gas plays, SilverBow Resources SBOW might be an excellent selection.

A pure-play upstream operator in the Eagle Ford Shale in South Texas, SilverBow Resources is a natural gas-focused exploration and production company. Over 30 days, the Zacks Rank #1 (Strong Buy) company has seen the Zacks Consensus Estimate for 2021 increase 39.3%. SilverBow controls 165,000 net acres in the Eagle Ford and around 80% of its total output comprises natural gas.

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Comstock Resources, Inc. (CRK) : Free Stock Analysis Report
 
EQT Corporation (EQT) : Free Stock Analysis Report
 
Southwestern Energy Company (SWN) : Free Stock Analysis Report
 
Cabot Oil & Gas Corporation (COG) : Free Stock Analysis Report
 
Range Resources Corporation (RRC) : Free Stock Analysis Report
 
Antero Resources Corporation (AR) : Free Stock Analysis Report
 
SilverBow Resources Inc. (SBOW) : Free Stock Analysis Report
 
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