Dow Jones - Natural Gas Falls After Far Smaller Than Expected Draw From Stockpiles

DJ Natural Gas Falls After Far-Smaller-Than-Expected Draw from Stockpiles

   By Timothy Puko


  Natural gas prices plunged from gains to losses Thursday, going below $2 after new federal data showed stockpiles
shrank much less than expected last week.

  The U.S. Energy Information Administration said stockpiles fell by 70 billion cubic feet of natural gas in the week
ended Feb. 5. That is 14 bcf less than the average forecast from analysts and traders surveyed by The Wall Street
Journal and lower than what any of those forecasters predicted.

  The EIA update is widely considered one of the best measures of supply and demand for the natural gas market. The
smaller-than-expected drawdown from stockpiles would suggest smaller demand or larger supply than expected.

  "This report shows that supply/demand balance is more oversupplied than we thought, even at rock bottom prices,"
Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston, said in a note.

  Futures for March delivery settled down 5.2 cents, or 2.5%, at $1.994 a million British thermal units on the New York
Mercantile Exchange, within 25 cents of the 16-year low natural gas just set in December. On Thursday the market had
been rising, though only slightly, before the EIA report came at 10:30 a.m. ET.

  "It just takes the steam off the market for any bullishness in the near term," said Donald Morton, senior vice
president at Herbert J. Sims & Co., who runs an energy-trading desk.

  About half of U.S. homes use natural gas for heat, making winter weather the big driver for demand. But prices have
been grinding because of unseasonably warm temperatures, including in the week EIA just reported on.

  There is little reason to bid up prices in the near-term because stockpiles are so high and heating-demand has so
little time to make a difference before the end of winter, traders said. Last week's drain left stockpiles 25% above
levels from a year ago and 23% above the five-year average for the same week.

  Cash markets are strong at many eastern hubs because of the cold weather hitting those areas this week. But for March
futures, the glut in storage is a much bigger influence, traders said.

  "You're going to get those spurts (of cold), but at the end of the day spring is right around the corner," said John
Woods, president of JJ Woods Associates and a Nymex trader.
   FUTURES         SETTLEMENT      NET CHANGE
   Nymex March        $1.994          -5.2c
   Nymex April        $2.061          -5.0c
   Nymex May          $2.129          -4.5c
   CASH HUB              RANGE                PREVIOUS SESSION
   El Paso Perm       $1.87-$1.91               $1.8725-$1.90
   El Paso SJ         $1.875-$1.89              $1.8825-$1.9325
   Henry Hub          $2.11-$2.13               $2.12-$2.135
   Katy               $1.96-$2.035              $1.99-$2.055
   SoCal              $1.95-$1.96               $1.98-$2.03
   Tex East M3        $3.40-$3.75               $3.75-$4.94
   Transco 65         $2.04-$2.11               $2.09-$2.12
   Transco Z6         $5.20-$6.05               $5.00-$8.00
   Waha               $1.95-$1.96               $1.95-$1.97


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


  (END) Dow Jones Newswires

  February 11, 2016 16:42 ET (21:42 GMT)

  Copyright (c) 2016 Dow Jones & Company, Inc.

021116 21:42 -- GMT
------