DJ Natural-Gas Prices Fall on Larger-than-Expected Surplus -- Update
By Timothy Puko
NEW YORK--Natural-gas futures dipped to nearly a two-month low after a weekly stockpile report showed a larger
surplus than expected.
Producers added 94 billion cubic feet of gas to storage for the week ended Oct. 10, the U.S. Energy Information
Administration said. The addition was 4 bcf larger than the 90 bcf consensus average expectations of 21 analysts and
brokers in The Wall Street Journal survey.
The front-month November contract recently traded down 2.2 cents, or 0.6%, at $3.778 a million British thermal units
on the New York Mercantile Exchange. The price had fallen as far as $3.744, the lowest intraday price since Aug. 18.
Traders use the EIA update to gauge how quickly stockpiles are recovering from high demand that drained them to
11-year lows this winter. Last week's addition refilled stockpiles to 3.3 trillion cubic feet, within 10% of the
five-year average level for that week of the year. It had been at less than half of the average at the start of spring.
The stockpile addition is the fourth-highest ever for a week in October, according to EIA records that stretch back
through 1994. And it fits in with a string of large stockpile additions that have come throughout this year. Record
domestic production and comfortable weather that has limited demand have combined to keep the market well supplied.
That has capped prices when they usually start to rise for the upcoming winter-heating season.
"Historically, (it's) very big," said Anthony Lerner, senior vice president of industrial commodities at brokerage
R.J. O'Brien in New York. "These kind of numbers mean you're not going to have any kind of significant rally until
there's some winter-like weather."
This October's storage additions are trailing only 2011's, and that could spell trouble for prices, said Gabe Harris,
senior North America gas analyst at Wood MacKenzie. In October 2011 the shale gas boom was starting to flood markets,
but the typical cold never came in the ensuing winter, according to EIA. The combination of high supply and low heating
demand dropped prices at a time when they usually rise. By April 2012, average monthly spot prices at Henry Hub had
fallen 46% since October to $1.95/mmBtu, according to EIA records.
"That is a bit of an omen," Mr. Harris said.
Stockpiles are filling so fast this year that they are likely to end March at their second-highest level ever,
Macquarie Group Ltd. said this week in its new Commodities Compendium. It forecast a base Nymex price of $3.90/mm Btu
through March, only 2.6% higher than its current trade. By comparison, average monthly prices have jumped 17% between
October and February during the last five years.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
October 16, 2014 11:55 ET (15:55 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
101614 15:55 -- GMT
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