Dow Jones - Natural Gas Drops On Oversupply Worries

DJ Natural Gas Drops on Oversupply Worries



  By Timothy Puko


  Natural gas prices are falling as oversupply concerns continue to creep back into the market.

  Futures for August delivery recently fell 5.8 cents, or 2.1%, to $2.67 per million British thermal units on the New
York Mercantile Exchange. Intraday prices have hit their lowest point in nearly a month.

  Prices have spent most of July on the retreat since they started the month by surging to a one-year high, the
culmination of a rally that shot prices up 50% since then. However, the market still has a glut in storage leftover
from the winter and production near record highs, causing many to question whether the rally had gone too far too fast.

  As of July 8, storage levels totaled 3.2 trillion cubic feet, 19% above levels from a year ago and 22% above the
five-year average for the same week, according to the U.S. Energy Information Administration. Many still expect storage
levels to rise to 4 trillion cubic feet by the start of the winter and challenge the record highs.

  EIA will release its latest weekly update tomorrow, and it could show the weekly surplus nearing the five-year
average for the first time in months, said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an
energy-trading desk. Many are already expecting a rise in the number of active drilling rigs to soon lead to increasing
production, analysts said.

  "Yes, the heat has been rather extreme...but it appears supply has met the requirements," Mr. Morton said.

  Summer demand is highly connected to heat because power plants typically use more gas and run harder as consumers use
more air conditioning. Wednesday's weather forecasts may have also played a role in falling prices, analysts said.
While still predicting above-average temperatures, some private forecasters removed some of the extreme heat they had
predicted Tuesday, especially going into the first week of August.


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


  (END) Dow Jones Newswires

  July 20, 2016 10:22 ET (14:22 GMT)

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

072016 14:22 -- GMT
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