The U.S. Energy Department's weekly inventory release showed a smaller-than-expected increase in natural gas supplies, reflecting the commodity's brisk use for space heating by residential/commercial consumers and lower imports from Canada.
Despite the relatively soft (and below estimate) supply build, the latest injection has added to already bloated inventories. Gas stocks - currently some 7% above the five-year average levels - are at their record highs, reflecting low demand amid robust onshore output.
While natural gas inventories are no doubt still at elevated levels, the most recent injection - significantly lower than the average for this time - has cut the surplus relative to the last year and the five-year average.
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 businesses of natural gas-weighted companies and related support plays like Anadarko Petroleum Corporation ( APC ), Chesapeake Energy ( CHK ), Encana Corporation ( ECA ), Devon Energy Corporation ( DVN ), Nabors Industries ( NBR ), Patterson-UTI Energy ( PTEN ), Helmerich & Payne ( HP ) and Halliburton Company ( HAL ).
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states rose by 21 billion cubic feet (Bcf) for the week ended November 2, 2012, lower than the guided range (of 26-30 Bcf gain) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc. ( MHP ).
The increase was also lower than both the last year's build of 48 Bcf and the five-year (2007-2011) average addition of 36 Bcf for the reported week, thereby trimming the surplus relative to the benchmarks.
But in spite of the 'below-average' build during the past week, the current storage level - at an all-time high of 3.929 trillion cubic feet (Tcf) - is up 109 Bcf (2.9%) from the last year and 244 Bcf (6.6%) over the five-year average.
In fact, natural gas inventories in underground storage have persistently exceeded the five-year average since late September last year 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 past year or so, as production from dense rock formations (shale) - through novel techniques of horizontal drilling and hydraulic fracturing - remains robust, thereby overwhelming demand.