Natural Gas Prices Hold As Inventory Surplus Expands Slightly

Includes: UNG
by: Hard Assets Investor

By Sumit Roy

Natural gas was last trading fractionally lower at $3.56/mmbtu after the Energy Information Administration reported that operators injected 67 billion cubic feet into storage last week, above most analysts' expectations of a 62 bcf build. That was above last year's build of 66 bcf and equal to the five-year average build of 63 bcf.

In turn, inventories now stand at 3,130 bcf, which is 244 bcf below the year-ago level and 50 bcf above the five-year average (calculated using a slightly different methodology than the EIA).

The weather last week was cooler than seasonal norms, but warmer than the same period a year ago. The Edison Electric Institute said that utilities generated 84,594 GWh in the week ending Aug. 24, which was 2.8% above the same week a year ago.

Looking forward, the NOAA's six- to 10-day outlook is calling for mixed weather across the United States.

- to 10-Day Outlook

Meanwhile, the number of rigs drilling for natural gas in the U.S. fell by one to 387 last week.

Natural Gas Rig Count

Natural Gas

Bottom line: The latest inventory data from the EIA were neutral to bearish, as surplus against the five-year average rose to 50 bcf. Natural gas is currently edging up against the top end of its trading channel. Our view continues to be that prices will bottom out in September before rising into winter. Medium term, gas remains a trading commodity; abundant supplies will keep prices rangebound between $3 and $5 until U.S. exports begin to rise in 2015 and beyond.