Natural Gas Storage Hit Record High - Analyst Blog

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The U.S. Energy Department's weekly inventory release showed a lower-than-expected rise in natural gas supplies. However, the total working gas in storage is still well above the 5-year historical range, as mild weather continues to restrict the commodity's demand for power burn amid robust production. In fact, the most recent inventory-build has taken the storage level to a new all-time high.

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 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 businesses of natural gas-weighted companies and related support plays like Anadarko Petroleum Corp. (APC) , Chesapeake Energy (CHK) , EnCana Corp. (ECA) , Devon Energy Corp. (DVN) , Nabors Industries (NBR) , Patterson-UTI Energy (PTEN) , Helmerich & Payne (HP) and Halliburton Co. (HAL) .

Stockpiles held in underground storage in the lower 48 states rose by 9 billion cubic feet (Bcf) for the week ended November 18, 2011, below the guidance range (of 18-22 Bcf gain) of the analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc (MHP) .

The increase - the thirty-third injection in as many weeks - compares with last year's draw of 6 Bcf and the 5-year (2006-2010) average reduction of 7 Bcf for the reported week. The current storage level - at 3.852 trillion cubic feet (Tcf) - is at an all-time high, eclipsing the previous record of 3.843 Tcf reached last week. It is up 23 Bcf (0.6%) from last year and has crept up by 233 Bcf (6.4%) over the five-year average.

A supply glut has pressured natural gas futures for most of 2011, as production from dense rock formations (shale) - through novel techniques of horizontal drilling and hydraulic fracturing - remain robust, thereby overwhelming demand. As a matter of fact, natural gas prices have dropped more than 25% from this year's peak of about $5.00 per million Btu (MMBtu) in June to the current level of around $3.70 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana).

Of late, a mild autumn weather has driven a string of above-average inventory builds, indicating a grossly oversupplied market. Natural gas demand is currently going through a lean period - with the end of the peak cooling loads for summer and ahead of the winter heating season, coupled with tepid industrial demand in a weak economy. As a result, commodity prices continue to be under pressure against the backdrop of sustained strong production.

ANADARKO PETROL ( APC ): Free Stock Analysis Report

CHESAPEAKE ENGY ( CHK ): Free Stock Analysis Report

DEVON ENERGY ( DVN ): Free Stock Analysis Report

ENCANA CORP ( ECA ): Free Stock Analysis Report

HALLIBURTON CO (HAL): Free Stock Analysis Report

HELMERICH&PAYNE (HP): Free Stock Analysis Report

MCGRAW-HILL COS (MHP): Free Stock Analysis Report

NABORS IND (NBR): Free Stock Analysis Report

PATTERSON-UTI (PTEN): 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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