Natural Gas Stockpiles Down 20 Bcf - Analyst Blog
December 12 2011 - 9:30AM
Zacks
The U.S. Energy Department's weekly
inventory release showed a larger-than-expected drop in natural gas
supplies, as frigid weather in the West led to production
freeze-offs. However, gas stocks still remain at elevated levels –
8.7% above the 5-year average and 2.7% higher than the same period
last year – reflecting low demand amid robust onshore output.
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 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 fell by 20 billion cubic feet (Bcf)
for the week ended December 2, 2011, above the guidance range (of
9–13 Bcf draw) as per the analysts surveyed by Platts, the energy
information arm of McGraw-Hill Companies Inc
(MHP).
The decrease – the second
consecutive withdrawal of the 2011-2012 winter heating season after
stocks hit an all-time high in mid-November – is significantly less
than last year’s draw of 79 Bcf and the 5-year (2006–2010) average
drawdown of 66 Bcf for the reported week. The current storage level
– at 3.831 trillion cubic feet (Tcf) – is up 102 Bcf (2.7%) from
last year and 307 Bcf (8.7%) 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 30% from this year’s peak of about $5.00 per
million Btu (MMBtu) in June to the current level of around
$3.30–3.40 (referring to spot prices at the Henry Hub, the
benchmark supply point in Louisiana).
To make matters worse,
warmer-than-average weather across most of the country has delayed
the arrival of winter weather and the corresponding increased
natural gas demand for heating, indicating a grossly oversupplied
market that continue to pressure commodity prices in 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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