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U.S. Natural Gas Up, But Missed Analysts’ Targets

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The U.S government has announced that the nation’s gas supplies were up last week to 3.261 trillion cubic feet, from 3.241 trillion reported a week before. The week of August 10, gas supplies rose by a whopping 20 billion cubic feet. However, according to the report published by The Sacramento Bee, the reported level of rise in gas supply was still short of analyst estimates, which ranged between 22 billion to 26 billion cubic feet.

U.S. Natural Gas Up, But Missed Analysts' Targets

Additionally, the report notes that the inventory level was 12.5% up, compared to the five year average of 2.898 trillion cubic feet, and 15.7% more then last year’s reported level of 2.819 trillion cubic feet.

Consequently, the forces of supply and demand were well exhibited at the futures market, whereby the Natural Gas Sep 12 (NGU12.NYM) was down $0.03 per 1000 cubic feet, or 0.91% in New York, to exchange at $2.72, as at the time of this writing.

Additionally, the increased supply could affect the prices of the commodity, thereby putting pressure on sales of various Oil and Gas companies. Indeed, this government announcement will alert some large companies, like the Oklahoma-based Chesapeake Energy Corporation (NYSE:CHK), which recently signed a 15 year multimillion dollar deal with OGE Energy Corp (NYSE:OGE).

The deal will allow OGE’s subsidiary, Enogex to produce natural gas from approximately 500,000 acres of land in the Cleveland Sands, Granite Wash, Tonkawa, and Marmaton plays of northwestern Oklahoma and the Texas Panhandle. This promises to keep high levels of gas supply in the region in the foreseeable future.

Another large company, counting on the performance of the oil and gas industry for its success, is Exxon Mobil Corporation (NYSE:XOM), which as we reported earlier is also advancing its plans, with some reports indicating that it has already partnered with Russia’s Gazprom (MCX:GAZP.ME) in the hunt for oil exploration and mining at the Arctic.

The company posted one of the best results in its most recent quarterly filings. We also featured another article, indicating that Exxon Mobil offered more value, when compared to British Petroleum (NYSE:BP), Royal Dutch Shell Plc (NYSE:RDSA), and Chevron Corporation (NYSE:CVX).

While the hunt for more oil and gas deposits continues, cost implications accompany, and as we have learned in several of our oil & gas articles, sometimes these costs tend to hit the roof. The oil and gas industry has been under pressure due to strengthening of the U.S dollar, making the commodity’s price decline relatively. In as much as the impact may not yet have hit the U.S market full force, the increased supply is likely to further depress the prices, impacting adversely on the value of sales.

My bet is, if the government had announced a significant decline in supply, then the oil and gas companies would be smiling all the way to the bank.

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