What is the Natural Gas Storage and why is it important to you
The Natural Gas Storage Indicator is an estimate of natural gas volumes held in underground storage facilities. This indicator is compiled by the U.S. Energy Information Administration (EIA). Weekly estimates are provided for Gas volumes held in storage facilities at state and regional levels.
It shows Gas inventories for the reporting week as well as the previous one. Usually, after this report is published, Natural Gas prices move 3 to 5 cents per million British thermal units (MMBtu), according to eia.gov.
Being a seasonal fuel, stored Natural Gas has an important role during wintertime, because it is used to heat up. Also, any excess supply that’s delivered during summer must meet the demand of the winter months. Stored Natural Gas can be an insurance against unexpected accidents, such as natural disasters, that may influence its production or delivery, and is one of the ingredients used to make a wide range of products as plastic, fertilizer, anti-freeze, and fabrics.
U.S. Natural Gas consumption increased by 3% in 2019, reaching a record of 85.0 billion cubic feet per day (Bcf/d), according to EIA from their Natural Gas Monthly Report. EIA forecasts that Natural Gas production will average 94.2 Bcf/d in 2020, and the production is expected to drop at 92.5 Bcf/d until the end of the year.
For the last five years, Natural Gas stocks were above 2,021 Bcf. The average total supply of Natural Gas remained is 100 Bcf/d.
How the market is influenced by this report
Being a weekly release, it is easy to track the evolution of Natural Gas reserves. EIA expects the prices to stay below $2.00/MMBtu for the next couple of months. It forecasts that the Natural Gas prices will go up.
Alongside Natural Gas, Crude Oil is also a vital commodity used for industrial purposes. The price relationship between the two of them is simple: when one becomes more expensive, the other will be more desirable for consumers because of the lower prices and higher supply. Historically, on average, the price rapport between Natural Gas and Crude Oil was around 10:1. Oil trades in barrels, while the Natural Gas trades in millions of Btus. So, the ratio is 10 MMBtus of Natural Gas per one barrel of Oil.
Once you understand the relationship between supply and demand, things get easier. Usually, the movement between Natural Gas and Oil is inverse, and if you know about a precedent, you can make a prediction about the future price. When one commodity becomes more expensive than the other, there is often a reason for the price divergence. In the case of Oil and Natural Gas, it is usually supply and demand that influence the change. Analysts from Tudor, Pickering, Holt & Co. consider that “U.S. growth has been resting on OPEC cuts to balance the market”.
It is well known that Covid-19 influenced the movement of the market, but as the fear faded away, energy and stock markets balanced themselves, and Natural Gas Futures rebounded despite lack of weather-driven demand.
There are different opinions about the future of Natural Gas prices: According to analysts at Enverus, the market sentiment remains “overwhelmingly bearish”. On the other side, Genscape Inc. said it expects demand to rise. Samantha Dart, Damien Courvalin and Huan Wei, analysts at Goldman Sachs, are predicting a Natural Gas price of over $2, as a “sequential tightening of the balance from next winter”.
How to take advantage of Natural Gas news
Taking advantage of this can be done by trading CFDs, which allows investors to trade various commodities like precious metals, Oil, and Natural Gas. CFDs allow investors to trade in the price movement of the asset. CFDs provide traders with all the benefits and risks of owning an asset without actually owning it or having to take any physical delivery of the asset. Basically, a Natural Gas CFD reflects the price of a commodity. These CFDs allow investors to take both a long (buy) and a short (sell) position, they can trade the price movement.
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Sources: ir.eia.gov, investing.com, investopedia.com, naturalgas.org
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Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.
Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.