Natural Gas Breakout! EIA Reports Massive Withdrawal…
As you may know, we’ve been talking about natural gas a lot lately.
Why?
It’s simple. The commodity is in a seasonally strong time of the year. As a matter of fact, natural gas is now the top-performing commodity over the past month with an advance of just over 18%.
And those gains are likely to continue…
You see, the US Energy Information Administration (EIA) reported a shockingly bullish natural gas inventory report yesterday. For the week of November 29th, US storage levels dropped by 162 billion cubic feet (bcf). That’s a significantly steeper withdrawal than the 138 bcf analysts were expecting.
As a result, natural gas is surging above the highly important $4.00 mmBtu price resistance level.
Take a look…
As you can see, the spot price shot to $4.14 in yesterday’s trading session. This one-day gain of over 4% means investors drastically underestimated the demand created by freezing temperatures sweeping the nation.
Speaking of demand…
This is the largest November natural gas withdrawal on record. What’s more, it pushes total US storage 5.2% below last year and 2.8% under the 5-year average.
Here’s the EIA’s most recent storage level chart…
As you can see, current inventories (blue line) dove below the 5-year average (gray line) last week. This is a surprisingly quick drop for storage levels considering the reading is for the last week of November.
No doubt about it, cold temperatures are taking down gas inventories in a hurry…
Usually we don’t see this large of a withdrawal until the heart of winter in January and February. What’s more, it’s a great indication that high demand can still draw down supplies in the face of robust US production.
So what does all this bullish information mean for the natural gas producers?
Not surprisingly, shares of SouthWestern Energy (SWN), Ultra Petroleum (UPL), and Cabot Oil & Gas (COG) jumped higher on yesterday’s news. As you may remember, I mentioned these three companies as a way to winterize your portfolio a few weeks ago.
All three of these names are popping now that investors realize natural gas prices have a very good chance of breaking last winter’s high of $4.43. Such an upward surge would push internal rates of return through the roof thanks to these companies’ industry leading production costs.
And the best part is…
It’s not too late to pick up shares of SWN, UPL, and COG for your portfolio. The ultra-bullish start to the winter heating season will likely keep these stocks trending higher for the foreseeable future.
Stay tuned to Commodity Trading Research for continued coverage of natural gas and other commodity markets!
Until Next Time,
Justin Bennett
Category: Energy, Natural Gas
