Analysts Forecast 98 Billion-Cubic-Foot Decline in U.S. Natural Gas Inventories

Natural gas inventories in the United States are expected to decline by 98 billion cubic feet (Bcf) in the week ended Feb. 28, according to a survey by The Wall Street Journal. This decline, if realized, would bring the total inventory deficit to 242 Bcf against the five-year average, up from the current deficit of 238 Bcf. The expected drawdown is in line with the average estimate of 10 analysts, brokers, and traders, which ranges from a draw of 83 Bcf to a draw of 110 Bcf.

The U.S. Energy Information Administration (EIA) is scheduled to release weekly storage data on Thursday at 10:30 a.m. EST, which will confirm whether the expected decline occurred. If the drawdown is confirmed, it would indicate that natural gas demand is outpacing supply, potentially putting upward pressure on prices.

The expected decline in natural gas inventories comes as the U.S. enters the final weeks of the winter heating season. Colder-than-normal temperatures in recent weeks have led to increased demand for natural gas, particularly in the residential and commercial sectors. Additionally, LNG exports have been strong, further tightening the supply-demand balance.

Analysts at Tudor Pickering Holt & Co. expect the Henry Hub natural gas spot price to increase to $3.25 in the second half of the year and $3.50 by next winter, driven by a shortage of LNG and increased demand from Asia. The high Asian demand has led to less gas going to Europe, which is having to use gas it had placed in storage. This, in turn, has led to higher utilization at U.S. processing plants, which could drive further price increases.

In this context, investors may want to consider stocks that are well-positioned to benefit from higher natural gas prices. Some analysts have upgraded stocks such as Range Resources (RRC), Southwestern Energy (SWN), Antero Resources (AR), Advantage Oil & Gas (AAV), and Birchcliff Energy (BIR) to "Buy" based on their expectations for the natural gas market. As the winter heating season comes to an end and the market enters the shoulder months, investors should keep an eye on natural gas inventory levels and price movements to identify potential investment opportunities.