Gas Stocks Rise as Expected - Analyst Blog
July 22 2011 - 1:12PM
Zacks
The U.S. Energy Department's weekly inventory release showed an
in-line build-up in natural gas supplies, as increased cooling
demand on the back of extremely hot weather was offset by higher
domestic production.
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 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 60 billion cubic feet (Bcf) for the week ended July 15,
2011, at the midpoint of the guidance range (of 58–62 Bcf gain) of
the analysts surveyed by Platts, the energy information arm of
McGraw-Hill Companies Inc (MHP).
The increase – the fifteenth injection in as many weeks – is
bigger than last year’s build-up of 55 Bcf, but lower than the
5-year (2006–2010) average addition of 67 Bcf for the reported
week. The current storage level at 2.671 trillion cubic feet (Tcf)
is down 213 Bcf (7.4%) from last year and is 59 Bcf (2.2%) 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 the peak in heating demand for winter,
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 and an
active hurricane season.
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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