Will Natural Gas Rally from its Recent Fall?

The natural gas market has cooled down in recent weeks.  According to the latest U.S Energy Information Administration report, last week’s buildup in natural gas storage was higher than the five year average buildup. Will natural gas price change direction and bounce back? Let’s analyze the recent developments in the natural gas market.

During last week, the price of Henry Hub (short term delivery) decreased by 1.5%. Furthermore, United States Natural Gas (UNG) also declined by 1.2%. As of last week, the Henry Hub price was still $0.62 per million BTUs higher than the price during the same week in 2012. The recovery of natural gas may have contributed to the rise of shares of gas and oil producers such Chevron (CVX): During last week, Chevron‘s stock decreased by 2.8%. If natural gas continues falls, this could cut down the expected revenues of Chevron and thus slightly adversely affect the company’s value.

Storage

Based on the latest EIA weekly report, the underground natural gas storage  increased by 101 Bcf and reached 3,487 Bcf. In comparison, in 2012 the storage increased by 77 Bcf; the five years average also rose by 82 Bcf. The current storage for all lower 48 states is 4.5% below last year’s storage and 1.4% higher than the 5-years average. The table below shows the changes in storage in the past several years. As seen below, the average buildup this year (so far) is at its highest level since 2009.

The rest of this analysis is at Seeking Alpha

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