Natgas Supplies Rise as Expected - Analyst Blog
June 17 2011 - 10:00AM
Zacks
The U.S. Energy Department's weekly
inventory release showed an in-line build-up in natural gas
supplies, as a production drop was offset by reduced natural gas
cooling demand on the back of moderating weather.
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, latest storage level estimates, recent weather data and
other market activity 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 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 69 billion cubic feet (Bcf)
for the week ended June 10, 2011, towards the lower end of
expectations (of 68–72 Bcf gain) of the analysts surveyed by
Platts, the energy information arm of McGraw-Hill Companies
Inc (MHP).
The increase – the tenth injection
in as many weeks – is however lower than both the last year’s
build-up of 89 Bcf and the 5-year (2006–2010) average build of 87
Bcf for the reported week. The current storage level, at 2.256
trillion cubic feet (Tcf), is down 275 Bcf (10.9%) from last year
and is 76 Bcf (3.3%) below the five-year average.
A supply glut had pressured natural
gas futures for most of 2010, as production from dense rock
formations (shale) – through novel techniques of horizontal
drilling and hydraulic fracturing – remained robust, thereby
overwhelming demand.
Storage amounts hit a record high
of 3.840 Tcf in November, while gas prices during the year fell
21%. As a matter of fact, natural gas prices have dropped nearly
70% from a peak of about $13.60 per million Btu (MMBtu) to the
current level of around $4.40, in between sinking to a low of $2.50
in September 2009.
However, stocks of the commodity
slid approximately 2.261 Tcf during the five-month period (November
5, 2010 to April 1, 2011) on the back of a colder-than-normal end
to this past winter, production freeze-offs in January/February,
and the steadily declining rig count. These factors cut into the
U.S. supply overhang, thereby creating a deficit in natural gas
inventories after erasing the hefty surplus over last year’s
inventory level and the five-year average level.
But with the end of winter's peak
heating demand, natural gas prices continue to be under pressure
against the backdrop of sustained strong production. Producers are
now hoping that the gap between supply and demand will further
narrow in the coming months as they bet on a hotter-than-expected
summer.
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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