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Gas industry

Natural Gas Supplies See Smaller-Than-Expected Build-Up

Strategic Insights

— 2 min read

The U.S. Energy Department's weekly inventory release showed a smaller-than-expected build-up in natural gas supplies, driven by a decrease in domestic production, despite warmer temperatures in the northern parts of the country. The Weekly Natural Gas Storage Report, published by the Energy Information Administration (EIA), provides an overview of the level of reserves and their movements, helping investors understand the demand/supply dynamics of natural gas. The report affects businesses of natural gas-weighted companies 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).

Key Takeaways:

  • Natural gas stockpiles in the lower 48 states rose by 28 billion cubic feet (Bcf) for the week ended April 8, 2011, below expectations of 31-35 Bcf withdrawal by analysts surveyed by Platts.
  • The increase is lower than last year's build-up of 79 Bcf but is equal to the 5-year (2006-2010) average build of 28 Bcf for the reported week.
  • Current storage level, at 1.607 trillion cubic feet (Tcf), is down 137 Bcf (7.9%) from last year's level but is 10 Bcf (0.6%) above the five-year average.
  • A supply glut had pressured natural gas futures for much of 2010, due to robust production from dense rock formations (shale) through novel techniques of horizontal drilling and hydraulic fracturing.
  • Storage amounts hit a record high of 3.840 Tcf in November, while gas prices during the year fell 21%.
  • Natural gas prices have dropped nearly 70% from a peak of about $13.60 per million Btu (MMBtu) to the current level of around $4.20.

Statistics:

  • 28 billion cubic feet (Bcf) - the increase in natural gas stockpiles for the week ended April 8, 2011.
  • 31-35 Bcf - the expected withdrawal by analysts surveyed by Platts.
  • 79 Bcf - last year's build-up in natural gas stockpiles.
  • 28 Bcf - the 5-year (2006-2010) average build of natural gas stockpiles for the reported week.
  • 1.607 trillion cubic feet (Tcf) - the current storage level.
  • 7.9% - the decrease in natural gas stockpiles from last year's level.
  • 0.6% - the increase in natural gas stockpiles above the five-year average.
  • 3.840 Tcf - the record high storage amount in November.
  • 21% - the fall in gas prices during 2010.
  • 70% - the drop in natural gas prices from the peak of $13.60 per million Btu (MMBtu) to the current level of around $4.20.

Sources:

  • Zacks.com via COMTEX - "Byline: Zacks Equity Research Apr 19, 2011"
  • Platts - "analysts surveyed by Platts"
  • Energy Information Administration (EIA) - "Weekly Natural Gas Storage Report"
  • Comtex News Network, Inc. - "SmarTrend" alerts and information
  • McGraw-Hill Companies Inc - "energy information arm"

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