The U.S. Energy Department's weekly inventory release showed a
smaller-than-expected decrease in natural gas supplies. 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 172 billion cubic feet (Bcf) for the week ended Jan 18,
2013, lower than the guided range (of 173-177 Bcf drawdown) as
per the analysts surveyed by Platts, the energy information arm
McGraw-Hill Companies Inc.
The decrease represents the ninth withdrawal of the 2012-2013
winter heating season after stocks hit an all-time high in early
November last year. Though the draw was lower than the five-year
(2008-2012) average reduction of 176 Bcf for the reported week,
it exceeded last year's withdrawal of 162 Bcf.
Following the past week's reduction, the current storage level -
at 2.996 trillion cubic feet (Tcf) - is down 157 Bcf (5.0%) from
the last year but is still 320 Bcf (12.0%) above the five-year
In fact, natural gas inventories in underground storage have
persistently exceeded the five-year average since late September
2011 and ended the usual summer stock-building season of April
through October at a record 3.923 Tcf (as of October 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 set to be colder than the unusually
warm last one, we might expect 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.
WPX Energy Inc.
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).