Dow Jones Natural Gas - Futures Lose Big On Smaller Than Expected Stockpile Drain

DJ Natural Gas Futures Lose Big on Smaller-Than-Expected Stockpile Drain

   By Timothy Puko


  Natural-gas futures sold off Thursday after a smaller-than-expected drain on storage levels added to pessimism about
an oversupplied market.

  The front-month February contract settled down 13.9 cents, or 4.7%, at $2.835 a million British thermal units on the
New York Mercantile Exchange. Prices had fallen below $2.80/mmBtu and set a new two-year low in intraday trading before
a small rally to end floor trading.

  Storage levels shrank by 216 billion cubic feet in the week ended Jan. 16, the U.S. Energy Information Administration
said. The drain was 11 bcf smaller than the 227-bcf consensus average of 19 forecasters surveyed by The Wall Street
Journal.

  That damped hope that winter cold could rebalance an oversupplied market. Half of U.S. homes use natural gas for
heat, and that usually leads to price peaks in the winter. This year, supply has been so overwhelming that even
near-record demand hasn't been enough to keep up.

  "There is little hope from current sellers that natural gas will be at a premium in late February," Aaron Calder,
senior market analyst at energy-consulting firm Gelber & Associates in Houston, said in a note to clients.

  Macquarie Group Ltd. had said Tuesday that the country could have 4.7 trillion cubic feet of gas available for
storage by October, 600 billion cubic feet more than the country's storage system has the capacity to hold. Analysts
said Thursday that the lower-than-expected storage drain is a sign that producers hadn't slowed down as much as some
traders had hoped.

  "You're seeing a market that is well-stocked," said John Woods, president of JJ Woods Associates and a Nymex trader.

  The losses put natural gas at a crossroads. Such low prices could be within a few cents of competing against the
country's cheapest coal, which means power plants could step in and buy more gas, lifting the market, analysts at CIBC
World Markets said in a note. But if there is no string of consistent cold, even that may not be enough new demand to
soak up a growing glut and prices could drop below $2.50/mmBtu heading into the summer, the bank adds.

  "You still have guys who are trying to sell anything they can...anything eight months out," said Michael Doyle, a
broker at Eclipse International Inc. in New York.

  The drain brought storage levels to 2.6 trillion cubic feet, 8.2% more than a year ago and 5.5% below the five-year
average.

FUTURES          SETTLEMENT   NET CHANGE
Nymex February     $2.835      -13.9c
Nymex March        $2.827      -11.3c
Nymex April        $2.817       -8.9c

CASH HUB      RANGE            PREVIOUS SESSION
El Paso Perm  $2.75-$2.77            $2.765-$2.80
El Paso SJ    $2.76-$2.77            $2.7725-$2.80
Henry Hub     $2.90-$2.955           $2.91-$2.965
Katy          $2.82-$2.85            $2.83-$2.89
SoCal         $2.79-$2.87            $2.85-$2.90
Tex East M3  $2.695-$2.92            $2.45-$2.955
Transco 65   $2.84-$2.93      $2.875-$2.96
Transco Z6   $3.23-$3.28              $3.18-$3.30
Waha         $2.74-$2.785            $2.76-$2.81


  Write to Timothy Puko at tim.puko@wsj.com


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  (END) Dow Jones Newswires

  January 22, 2015 14:59 ET (19:59 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

012215 19:59 -- GMT
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