Gas Stocks Dip Below Year-Ago Level - Analyst Blog
10 Dicembre 2012 - 5:25PM
Zacks
The U.S. Energy Department's weekly inventory release showed a
larger-than-expected decrease in natural gas supplies on account of
slightly lower production. The storage withdrawal – the third for
the winter heating season – has also pushed down natural gas stocks
below the year-ago level for the first time since the week ended
November 4, 2011.
About the Weekly Natural Gas Storage
Report
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, the latest storage
level estimates, recent weather data and other market activities or
events.
The report provides an overview of the level of reserves and their
movements, thereby helping investors 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 Company (HAL).
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states fell
by 73 billion cubic feet (Bcf) for the week ended November 30,
2012, higher than the guided range (of 64–68 Bcf gain) as per the
analysts surveyed by Platts, the energy information arm of
McGraw-Hill Companies Inc. (MHP).
The decrease represents the third withdrawal of the 2012-2013
winter heating season after stocks hit an all-time high in early
November. More importantly, the weekly storage draw has overturned
the excess stock over the year-ago period, while trimming the
surplus relative to the five-year average benchmark.
As a result of the ‘better-than-expected’ draw during the past
week, the current storage level – at 3.804 trillion cubic feet
(Tcf) – is down 33 Bcf (0.9%) from the last year and just 168 Bcf
(4.6%) over the five-year average.
A supply glut kept the natural gas prices under pressure during the
past year or so, as production from dense rock formations (shale) –
through novel techniques of horizontal drilling and hydraulic
fracturing – remains robust, thereby overwhelming demand.
In fact, natural gas inventories in underground storage have
persistently exceeded the five-year average since late September
last year and ended the usual summer stock-building season of April
through October at a record 3.923 Tcf (as of October 31, 2012).
However, with the upcoming U.S. winter set to be colder than the
unusually warm last one and domestic output likely to drop in 2013
versus 2012 on the back of natural gas players announcing
drilling/volume curtailments, we might expect some balancing of the
commodity’s supply/demand disparity.
This, in turn, could improve the prices and buoy natural gas
producers like Ultra Petroleum Corp. (UPL),
Talisman Energy Inc. (TLM), Encana and
Chesapeake.
Zacks Rank
All the natural gas-associated companies mentioned above are Zacks
#3 Rank (Hold) stocks, implying that these are expected to perform
in line with the broader U.S. equity market over the next one to
three months.
ANADARKO PETROL (APC): Free Stock Analysis Report
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
DEVON ENERGY (DVN): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
HELMERICH&PAYNE (HP): Free Stock Analysis Report
MCGRAW-HILL COS (MHP): Free Stock Analysis Report
NABORS IND (NBR): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
ULTRA PETRO CP (UPL): Free Stock Analysis Report
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