The U.S. Energy Information Administration or EIA recently published the update for natural gas for the week that ended on 11 September 2015. The inventories of natural gas, as per the report, rose in accordance with the market expectations only, which means that the prices shall remain unaffected. During last week, the prices remained stuck to 0.3% less. This means that the natural gas producers like Southwestern Energy Company (NYSE:SWN) shall be witnessing lower revenues.
Facts and analysis from the report
According to the report, the storage of natural gas inventory had an upstick of 73 billion cubic feet. This meant that the inventories for that week increased to 3,334 billion cubic feet. The analysts had given more or less the same figures.
When the stock of natural gas increases according to what the analysts predict, it means that the prices do not change much. The situation hints towards the fact that the market has adjusted the price of natural gas as per the fundamentals of demand and supply. However, in case there is a difference in the actual inventories figure and the expectation, the prices can alter, but only for the short term.
For the week that ended on 11 September 2015, the net injection was 73 billion cubic feet in comparison to 90 billion cubic feet in the same week in 2014. The average net injection for the 5 years stood at 75 billion cubic feet.
Impact on Southwestern Energy
The first affect shall be the lower revenue. This is so because the natural gas producers earn more revenues when the prices increase and lesser revenues when the natural gas prices drop down.
A fall in the prices of natural gas also means that MLPs like Oneok Partners LP (NYSE:OKS) are also having a negative impact. This is so because the producers then, are not inspired and motivated to increase production of natural gas. This in turn means that the MLPs have lower volume of natural gas to transport.
According to the Short-Term Energy Outlook report published by EIA on 9 September 2015, at the end of October, which is the injection season, the inventories will stand at 3,840 Bcf. This implies that the natural gas inventories shall be 1.1% or 43 Bcf more than the average of 5 years.