The U.S. Energy Department's weekly inventory release showed a
larger-than-expected decrease in natural gas supplies on account
of cold temperatures across most parts of the country. Despite
this drawdown, gas stocks continue to remain bloated, reflecting
low demand amid robust onshore output.
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About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report - brought out by the Energy
Information Administration (EIA) every Thursday since 2002 -
includes updates on natural gas market prices, the latest storage
level estimates, recent weather data and other market activities
The report provides an overview of the level of reserves and
their movements, thereby helping investors understand the
demand/supply dynamics of natural gas. It is an indicator of
current gas prices and volatility that affect businesses of
natural gas-weighted companies and related support plays.
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states
fell by 146 billion cubic feet (Bcf) for the week ended Mar 01,
2013, higher than the guided range (of 130-134 Bcf drawdown) as
per the analysts surveyed by Platts, the energy information arm
McGraw-Hill Companies Inc.
The decrease represents the 15
withdrawal of the 2012-2013 winter heating season after stocks
hit an all-time high in early November last year. Moreover, the
draw was higher than both the last year's withdrawal of 92 Bcf
and the five-year (2008-2012) average reduction of 107 Bcf for
the reported week.
Following the past week's reduction, the current storage level -
at 2.083 trillion cubic feet (Tcf) - is down 361 Bcf (14.8%) from
the last year but is still 269 Bcf (14.8%) above the five-year
In fact, natural gas inventories in underground storage have
persistently exceeded the five-year average since late Sep 2011
and ended the usual summer stock-building season of April through
October at a record 3.923 Tcf (as of Oct 31, 2012).
A supply glut kept the natural gas prices under pressure during
the couple of years or so, as production from dense rock
formations (shale) - through novel techniques of horizontal
drilling and hydraulic fracturing - remain robust, thereby
However, with the U.S. winter colder than the unusually warm last
one, we are experiencing some balancing of the commodity's
supply/demand disparity on the back of its more normalized use
for space heating by residential/commercial consumers.
This, in turn, could improve the prices and buoy natural gas
producers, particularly smaller players like
Quicksilver Resources Inc.
Linn Energy LLC
Forest Oil Corp.
). With an improvement in the companies' ability to generate
positive earnings surprises, they can then move higher from their
current Zacks Rank #3 (Hold).