Dow Jones - Natural Gas Commentary

DJ Natural Gas Trims Losses After Larger-Than-Expected Stockpile Fall



  By Timothy Puko


  Natural gas pared losses after data showed stockpiles declining slightly more than expected last week, a time of year
when stockpiles usually grow.

  The U.S. Energy Information Administration said gas stockpiles fell by 3 billion cubic feet in the week ended April
8. That is 2 bcf more than the average forecast from analysts and traders surveyed by The Wall Street Journal.

  The EIA update is widely considered one of the best measures of supply and demand for the natural-gas market. The
larger-than-expected decrease in stockpiles suggests robust demand or smaller-than-expected supplies, though a 2 bcf
difference when compared with expectations is also considered very small.

  "It just confirms that we're starting to have some more bullish storage changes," said Kent Bayazitoglu, analyst at
the energy-consulting firm Gelber & Associates in Houston. "Maybe there's a way we can whittle this huge storage supply
away. Maybe this is the start of that process."

  Futures for May delivery recently traded down 4.8 cents, or 2.4%, at $1.988 a million British thermal units on the
New York Mercantile Exchange. Prices had fallen as low as $1.971/MMBtu in the hour before the EIA data. The losses were
halved in the minutes after the EIA release. But since then, prices have fallen back roughly to the levels in early
trading.

  The amount of natural gas in storage is still above-average for this time of year, despite last week's unexpectedly
large decline. Storage volumes tied a record high for the end of winter due to warm weather that limited heating demand
and surging production. Inventories are 63% higher than they were at this time a year ago and 52% higher than the
five-year average, according to the EIA.

  It make sense that the market would pare losses because of the surprisingly large draw, but it's also unlikely that
Thursday's numbers will continue to support prices, said Bob Yawger, director of the futures division at Mizuho
Securities USA Inc.

  "It's hard to really run your flag up on that when you have record storage at this time of year," Mr. Yawger said.
"There's still plenty of gas to spare for anybody who needs it."


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


  (END) Dow Jones Newswires

  April 14, 2016 11:23 ET (15:23 GMT)

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

041416 15:23 -- GMT
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