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Natural Gas Prices Down on Record Stock, Mild Weather

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The U.S. Energy Department's latest weekly inventory release showed an increase in natural gas storage by 15 billion cubic feet. This was below the market expectation of around 23 billion cubic feet but pushed natural gas storage levels to a record 4 trillion cubic feet.

As a result, natural gas prices are still averaging less than half of what it did some five to six years ago. With production remaining plentiful and expected to outpace demand for the most of 2015, this fuel is likely to stay depressed for a while.

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 or events.

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 the business of natural gas-weighted companies and related support plays.

Analysis of the Data

Stockpiles held in underground storage in the lower 48 states rose by 15 billion cubic feet (Bcf) for the week ended Nov 13, 2015, below the guided range (of 17-21 Bcf gain) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Financial Inc.

However, the increase - the 33rd successive weekly injection - was more than both last year's build of 11.2 Bcf and the 5-year (2010-2014) average addition of 5.5 Bcf for the reported week.

Following last week's climb, the current storage level - at 4.000 trillion cubic feet (Tcf) - is up 404 Bcf (11.2%) from last year and 207 Bcf (5.5%) above the five-year average. Moreover, with this addition, natural gas inventories are now in the record territory, getting past the previous highest level of 3.985 Tcf set last week.

Bearish Pressure on Prices

From a peak of about $13.50 per MMBtu in 2008 to just above $2.2 now - sinking in between to a 10-year low of under $2 in 2012 - the plummeting value of natural gas represents a decline of around 80% over seven years. In the absence of major production cuts, we do not expect much upside in gas prices in the near term. Things were made worse by expectations of soft heating demand with forecasts of higher temperatures across certain regions of the U.S. in the short term.

The price weakness translates into limited upside for natural gas-weighted companies including the likes of Chesapeake Energy Corp. CHK , Range Resources Corp. RRC , Southwestern Energy Co. SWN , Cabot Oil & Gas Corp. COG , Rice Energy Inc. RICE , and Eclipse Resources Corp. ECR .

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RANGE RESOURCES (RRC): Free Stock Analysis Report

SOUTHWESTRN ENE (SWN): Free Stock Analysis Report

CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

CABOT OIL & GAS (COG): Free Stock Analysis Report

RICE ENERGY INC (RICE): Free Stock Analysis Report

ECLIPSE RESRCS (ECR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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