The U.S. Energy Department's weekly inventory release showed a
larger-than-expected decrease in natural gas supplies. Despite
this drawdown, gas stocks continue to remain bloated, reflecting
low demand amid robust onshore output.
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 like
Anadarko Petroleum Corp.
Devon Energy Corp.
Helmerich & Payne
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states
fell by 201 billion cubic feet (Bcf) for the week ended January
4, 2013, higher than the guided range (of 183-187 Bcf drawdown)
as per the analysts surveyed by Platts, the energy information
McGraw-Hill Companies Inc.
The decrease represents the seventh withdrawal of the 2012-2013
winter heating season after stocks hit an all-time high in early
November. Moreover, the draw was significantly higher than both
the last year's withdrawal of 90 Bcf and the five-year
(2008-2012) average reduction of 132 Bcf for the reported week.
As a result of the 'better-than-expected' draw during the past
week, the current storage level - at 3.316 trillion cubic feet
(Tcf) - is down 88 Bcf (2.6%) from the last year though it is
still 320 Bcf (10.7%) above the five-year average.
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
Ultra Petroleum Corp.
Talisman Energy Inc.
), Encana and Chesapeake.
Among the natural gas-associated companies mentioned above,
Anadarko Petroleum, Chesapeake Energy, Ultra Petroleum, Encana,
Nabors, Devon Energy, Patterson-UTI Energy and Halliburton are
all Rank #3 (Hold) stocks, implying that these are expected to
perform in line with the broader U.S. equity market over the next
one to three months.
However, Talisman retains a Rank #5 (Strong Sell), while
Helmerich & Payne's Rank #2 (Buy) implies that the company is
likely to outperform the broader U.S. equity market over the next
one to three months.
ANADARKO PETROL (APC): Free Stock Analysis
CHESAPEAKE ENGY (CHK): Free Stock Analysis
DEVON ENERGY (DVN): Free Stock Analysis
ENCANA CORP (ECA): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis
HELMERICH&PAYNE (HP): Free Stock Analysis
MCGRAW-HILL COS (MHP): Free Stock Analysis
NABORS IND (NBR): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis
TALISMAN ENERGY (TLM): Free Stock Analysis
ULTRA PETRO CP (UPL): Free Stock Analysis
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