If you plan on trading natural gas, you really can’t afford to miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration (EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). The main natural gas moving figure in there is the change in inventories from the previous week. You can check out what this figure comes out as in the Weekly Calendar.
Before going any further, it’s necessary to understand the way you measure natural gas. While crude oil is measured in barrels (with every barrel containing 42 gallons of oil), natural gas is measured in cubic feet. When it comes to the gas inventories report, we’re speaking about billions of cubic feet, Bcf for briefing.
Like the oil inventories, if the change in inventories is positive then there’s more gas in stock and fewer demand for it. In this case the price of natural gas tends to fall. On the opposite side, when gas inventories are falling, demand is up and the price of natural gas tends to rise.
Leading up to the natural gas inventories release, market analysts will give their read on what the change in inventories figure will be. The average expectation of all these different market analysts becomes the market consensus figure and this expectation gets built into the price of natural gas. Therefore let’s say that analysts expect that inventories will rise by 84 Bcf from the previous week. In this case, all else equal, the price of natural gas should fall leading up to the release.
When the actual change in
inventories number is released, it's
the deviation from the expected number that is extremely
important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf
increase was expected, then that is actually positive for the price of natural
gas. All else equal, the price of natural gas ought
to
rise after the release.
Posted on: Monday, 13th of February, 2012
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