Natural Gas Inventory on Track for Massive Increase

The U.S. Energy Information Administration (EIA) today reported that U.S. natural gas stocks increased by 57 billion cubic feet last week, compared with an expected build of 65 billion cubic feet anticipated by analysts. Natural gas futures prices were trading up by about 1.2% in advance of the EIA's report, at around $3.50 per million BTUs, and rose to $3.52 immediately following the EIA report.

The EIA reported that U.S. working stocks of natural gas totaled 3.06 trillion cubic feet, about 44 billion cubic feet higher than the five-year average of 3.02 trillion cubic feet. Working gas in storage totaled 3.3 trillion cubic feet for the same period a year ago. Natural gas inventories remain roughly in the middle of the five-year range. The five-year average increase for the period is 56 billion cubic feet.

Demand for cooling is expected to rise with temperatures across the Midwest over the next couple of weeks. The late summer hot spell should keep natural gases prices higher during the period and into the fall injection season.

The EIA today issued a forecast for total natural gas storage inventories to reach 3.8 trillion cubic feet by the end of October. Peak capacity for U.S. natural gas storage is 4.265 trillion cubic feet. The agency noted that natural gas use for electricity generation is down about 20%, from last year and demand is expected to fall by another 12% in the third quarter. The impact on prices could be slightly negative.

Here is how stocks of the largest U.S. natural gas producers are reacting to today's report:

Exxon Mobil Corp. (NYSE: XOM), the country's largest producer of natural gas, is up about 1% at $87.32 in a 52-week range of $84.70 to $95.49.

Chesapeake Energy Corp. (NYSE: CHK) is up 1.3% at $25.58 in a 52-week range of $16.23 to $25.64.

EOG Resources Inc. (NYSE: EOG) is up 1.8% at $154.49 in a 52-week range of $105.45 to $161.47.

The US Natural Gas Fund (NYSEMKT: UNG) is up 2.3% at $18.77 in a 52-week range of $16.59 to $24.09. The Market Vectors Oil Services ETF (NYSEMKT: OIH) is up 1.6% at $45.12 in a 52-week range of $36.24 to $46.78. The first fund tracks spot prices; the second includes major drillers and services companies.