Dow Jones - Natural Gas Falls As Oversupply Cancels Out Cold Weather Forecasts

DJ Natural Gas Falls as Oversupply Cancels Out Cold Weather Forecasts


  By Timothy Puko


  Natural gas prices took their second-biggest losses of March with stable weather reports capping a recent rally
connected to expectations for strong heating demand.

  Futures for April delivery settled down 6.9 cents, or 3.7%, at $1.794 a million British thermal units on the New York
Mercantile Exchange. Gas has now fallen in three of four sessions.

  The market had rallied Tuesday and early Wednesday on forecasts showing substantially below-normal temperatures
coming to the middle of the country through the first week of April. About half of U.S. homes use natural gas for heat,
so heating demand is often the market's biggest driver.

  But those forecasts were largely unchanged on Wednesday, and some said they would have had to be even colder to keep
the rally going. When that failed to materialize, traders cashed out on winning bets from the brief rally, said John
Woods, president of JJ Woods Associates and a Nymex trader.

  "There wasn't any weather to continue a bull run," he said.

  Heating demand would have to be rampant to overcome the large amount of supply. In February, output from the lower 48
states rose to its highest point since in at least nine years despite prices that are down more than 34% from a year
ago, Platts said Tuesday.

  The rampant production, combined with comfortable weather and limited heating demand to end the winter, is likely to
add more natural gas to stockpiles at a time of year when they usually decrease. Forecasts from analysts, traders and
brokers surveyed by The Wall Street Journal suggest stockpiles rose by 22 billion cubic feet in the week ended Friday,
compared to an average drain of 24 bcf for that same week during the past five years.

  The U.S. Energy Information Administration has its official update scheduled for 10:30 a.m. Thursday. If the survey's
average estimate proves correct, inventories as of March 18 would have totaled 2.5 trillion cubic feet, 69% above
levels from a year ago and 52% above the five-year average for the same week.

  Colder-than-normal weather in the spring also isn't as impactful as it is in the winter, making it unlikely "to
result in a surge in ... heating-related demand nor will it change the outcome that the end-of-the-season total
inventory level will still be at a record high level," Dominick Chirichella, analyst at the Energy Management
Institute, said in his morning note.


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


  (END) Dow Jones Newswires

  March 23, 2016 16:03 ET (20:03 GMT)

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

032316 20:03 -- GMT
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