The U.S. Energy Department’s weekly inventory release showed a larger-than-expected drop in natural gas supplies, attributable to high heating demand on the back of cold weather conditions that swept across much of the nation.
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 on the level of reserves and their movements, thereby helping investors to 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 174 billion cubic feet (Bcf) for the week ended January 21, 2011, above expectations (of 168–172 Bcf withdrawal) by analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc (MHP).
The latest decline – the eleventh in as many weeks – compares with last year’s draw of 109 Bcf and the 5-year (2006–2010) average draw of 152 Bcf for the reported week. The current storage level, at 2.542 trillion cubic feet (Tcf), is up 9 Bcf (0.4%) from last year’s level and remains 29 Bcf (1.2%) above the five-year average.
A supply glut has pressured natural gas futures for much of 2010, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remain robust, thereby overwhelming demand.
Storage amounts hit a record high of 3.840 Tcf in November, while gas prices during the year fell 21%. In fact, natural gas prices have dropped 68% from a peak of about $13.60 per million Btu (MMBtu) to $4.37 today, in between sinking to a low of $2.50 in September 2009.
However, the recent surge in the commodity’s demand (on account of low temperatures) continues to cut into the U.S. supply overhang, thereby bringing down the 5-year surplus to 1.2%, from almost 10% in November.