DJ Natural Gas Slides to Nearly Two-Year Low on Slow Stockpile Drain
By Timothy Puko
Natural gas prices closed at nearly a two-year low Monday as a slow stockpile drain eased investors' concerns
about supply shortages during the winter heating season.
Natural gas for January delivery settled down 32 cents, or 9.3%, at $3.144 a million British thermal units on the
New York Mercantile Exchange. It was the biggest one-day percentage loss since February, and the lowest closing price
since January 2013.
Prices are now down 15% in three straight losing sessions. Natural gas moved into a bear market during that streak
and is down 30% from the six-month high closing price of $4.489/mmBtu hit just a month ago.
Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low
stockpiles to catch up to where they were a year ago. That has encouraged the belief that supply is relatively healthy
and emboldened traders to sell, even with meteorologists predicting a colder-than-normal January and February are on
the way.
"Overall we're in a bear market here, so you have to sell," said Scott Gettleman, an independent trader in New
York.
Several weather forecasts had predicted far-below-normal temperatures spreading across the country late this week,
but those forecasts retreated in the last 24 hours. Meteorologists are predicting only slightly below-normal
temperatures for much of the country and normal or above-normal temperatures for many of the biggest East Coast
markets.
Half of all U.S. homes use natural gas for heating, making winter cold typically the biggest driver for demand.
Without severe cold in the forecast, traders see record production continuing to overwhelm the market.
"It highlights the incredible sensitivity of the market to weather and, right now, Mother Nature has been very,
very bearish," said Kyle Cooper, managing director of research at IAF Advisors, a Houston consulting firm.
Mild weather not only limits demand, it allows drillers to work uninterrupted. They are producing about 8 billion
cubic feet a day more than this time a year ago, Macquarie Research said last week as the losing streak started.
Macquarie and other analysts say that will push U.S. gas stockpiles beyond their five-year average levels by next
month. The unseasonably warm December already limited stockpile drains so much that last week the total amount of gas
in storage surpassed levels from a year ago for the first time in nearly a year. Many traders are selling to stay ahead
of this trend, analysts said.
Stockpiles were at 3.3 trillion cubic feet on Dec. 12, according to the U.S. Energy Information Administration.
The EIA is planning to release its next weekly update at noon EST Wednesday, a day earlier than usual because of the
Christmas holiday.
"The market is looking for a string of relatively low weekly storage withdrawals ahead and the increased
likelihood of an unmanageable" amount of gas in storage by the end of the winter, Teri Viswanath, a natural-gas
strategist at BNP Paribas SA in New York, said in a note. By March, stockpiles could be double or more what they were
at the end of the previous winter, as high as 2.2 trillion cubic feet, she said.
Monday's price move was so severe that analyst Jim Ritterbusch downgraded his price forecast for the rest of the
winter. The market had rejected several opportunities to rally and appeared to enter a lower trading range, he said,
likely between $3.05/mmBtu and $3.55/mmBtu, about 50 cents below the range he had predicted a week ago.
Write to Timothy Puko at timothy.puko@wsj.com
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(END) Dow Jones Newswires
December 22, 2014 15:14 ET (20:14 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
122214 20:14 -- GMT
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