EIA Reports Large Natural Gas Draw - Analyst Blog

The U.S. Energy Department's weekly inventory release showed a larger-than-expected drop in natural gas supplies, attributable to considerably colder-than-normal weather conditions.

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 243 billion cubic feet (Bcf) for the week ended January 14, 2011, above expectations (of 231–235 Bcf withdrawal) by analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc (MHP).

The latest decline – the tenth in as many weeks – compares with last year's draw of 248 Bcf and the 5-year (2006–2010) average draw of 133 Bcf for the reported week. The current storage level, at 2.716 trillion cubic feet (Tcf), is up 74 Bcf (2.8%) from last year's level and remains 51 Bcf (1.9%) 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%. However, the recent surge in the commodity's demand (on account of cold weather) has brought down the 5-year surplus to 1.9%, from almost 10% in November.

 
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