CHICAGO, April 10, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeChesapeake Energy (NYSE: CHK), Ultra Petroleum Corp. (NYSE: UPL), Talisman Energy Inc. (NYSE: TLM), Exxon Mobil Corp. (NYSE: XOM) and ConocoPhillips (NYSE: COP).
The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies, as record-warm March temperatures across the country have restricted the commodity's requirement for power burn. The injection – third in 2012 – has added to the already bloated inventories, thereby pressuring spot prices that slipped to a 31-month low.
Gas stocks – currently some 60% above the benchmark five-year average levels – are at their highest point for this time of the year, reflecting low demand amid robust onshore output.
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas.
It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays like Chesapeake Energy (NYSE: CHK).
Stockpiles held in underground storage in the lower 48 states rose by 42 billion cubic feet (Bcf) for the week ended March 30, 2012, above the guidance range (of 33–37 Bcf gain) as per the analysts surveyed by Platts.
The increase – the third injection of 2012 – is well above the 5-year (2007–2011) average build of 8 Bcf for the reported week and compares with last year's draw of 29 Bcf.
As a result of last week's stock build, the current storage level – at 2.479 trillion cubic feet (Tcf) – is now up 887 Bcf (55.7%) from last year and 934 Bcf (60.5%) over the five-year average.
With this huge and sharply widening natural gas surplus, inventories in underground storage have started to climb weeks earlier than the usual summer stock-building season – from April through October. They have persistently exceeded the five-year average since late September last year and are likely to beat the previous winter (March 31) record of 2.1 Tcf set in 1983.
A supply glut has pressured natural gas prices during the past year or so, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remain robust, thereby overwhelming demand.
As a matter of fact, natural gas prices have dropped approximately 57% from 2011 peak of $4.92 per million Btu (MMBtu) in June to the current level of around $2.10 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana). Incidentally, prices hit a 31-month low of $1.88 during last week.
To make matters worse, a near-record mild weather across most of the country curbed natural gas demand for heating all winter, leading to an early beginning for the stock-building season. The grossly oversupplied market continues to pressure commodity prices in the backdrop of sustained strong production.
This has forced several natural gas players to announce drilling/volume curtailments. Exploration and production outfits like Ultra Petroleum Corp. (NYSE: UPL)and Talisman Energy Inc. (NYSE: TLM) have reduced their 2012 capital budget to minimize investments in development drilling.
On the other hand, Oklahoma-based Chesapeake – the second-largest U.S. producer of natural gas behind Exxon Mobil Corp. (NYSE: XOM) – and rival explorer ConocoPhillips (NYSE: COP) have opted for production shut-ins to cope with the weak environment for natural gas that is likely to prevail during the year.
However, we feel these planned reductions will not be enough to balance out the massive natural gas supply/demand disparity and therefore we do not expect much upside in gas prices in the near term. In other words, there appears no reason to believe that the supply overhang will subside and natural gas will be out of the dumpster in 2012.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.