The natural gas market heated in the past several days even though the injections to storage were much higher than the five year average in the past week. Does the higher than normal injection to storage impacts the price of natural gas and United States Natural Gas (UNG)?
During last week, the price of natural gas rose again by 0.62%. Further, other natural gas related assets such as Chesapeake Energy (CHK) and United States Natural Gas also increased by 2.5% and 0.46%, respectively.
Despite this modest gain in the price of natural gas, the future market remains in Backwardation as indicated in the chart below.
The chart shows the changes in the difference between the price of natural gas and UNG, which were both normalized to the end of January 2014. In recent months the Backwardation has kept the price of natural gas close to 12% below the price of UNG.
According to EIA’s recent report, the underground natural gas storage increased by 107 Bcf and reached 1,606 Bcf. Last year, the storage grew by 95 Bcf; the five years average injection was 88 Bcf.
The above shows that last week’s injection was higher than last year’s injection and the five year average injection. Moreover, during the past five weeks, the storage injection rate was 24% higher than the five year rate. But do the changes in storage have a strong impact on the price of natural gas?
For the rest of the report you can see it at Seeking Alpha
For further reading:
- Is Chesapeake’s 2014 Outlook So Grim?
- What is Next for Devon Energy?
- Is Liquefied Natural Gas Still a Buy?
- Will The Recent Rally of Natural Gas Help Chesapeake?