Natural Gas Storage Was Down So Why Didn't The Price Go Up?

When the Natural Gas Storage Data was released on October 29, 2015, the number of Billion cubic feet (Bcf) came in lower than expected. Normally, this would signal the trader that the market was going to fly up. In anticipation of the release of the report, the market had been rising. However, once the report was released, it dropped off. So, why didn’t the price go up?

Billion cubic feet refers to the number of cubic feet of natural gas held in underground storage. The expected Bcf was 70. The actual amount came in at 63 Bcf. This is not a big difference. It was in a decent realm of expectation for this time of year. Usually, if the numbers from a report come out lower than expected, traders expect there will be a greater demand causing a rise in natural gas prices.

Here is an image showing the effect the Weekly Natural Gas Storage Data Report had on the Natural Gas market.

To view a larger image, click HERE.

In order to understand why the price dropped instead of going up, it is important to check more than just the actual versus the expected. Even comparing this week’s actual with the numbers from last week or last month does not give you a clear understanding of what caused the drop in price.

Even though the number came in below expectation and even though this number was lower than where it had been previously, it was still higher than the average for this time of year.
Checking a report from the U.S. Energy Information Administration shows that the increase of 63 Bcf was “higher than last year at this time and… above the 5-year average.”

To view a larger image, click HERE.

This explains how having a lower than expected number released in the report could cause the market to drop. When traders saw the lower number, it is possible that they knew it was more than last year and more than the five-year average.

When trading news reports like this one, you have to make sure that you are not just looking at the released number compared to what was expected. Furthermore, you cannot compare the released number to recently released numbers. You must compare three numbers: the released number, the number from one year ago and the number from five years ago. Be aware of any other reports being released the same day that may have an impact on the market you are trading.

You can be so focused on one aspect of your trading that you may forget to take into account other factors that can help you realize why the market moves differently than you had previously thought. It’s a simple lesson, but make sure you are looking at all three of the numbers when analyzing your trades.

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