Dow Jones - Natural Gas Drops On Oversupply Worries

DJ Natural Gas Drops on Oversupply Worries


   By Timothy Puko


  Natural gas prices fell to a one-month low as oversupply concerns continue to creep back into the market.

  Natural gas for August delivery settled down 7 cents, or 2.6%, to $2.658 per million British thermal units on the New
York Mercantile Exchange. It is the lowest settlement since June 17.

  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%. However, the market still has a glut in storage left over from the
winter and production near record highs, causing many to question whether the rally had gone too far too fast.

  Data due Thursday is likely to show the glut grew last week. The U.S. Energy Information Administration is likely to
report that stockpiles last week grew by 38 billion cubic feet in the week ended July 15, according to The Wall Street
Journal survey of analysts and traders.

  That would have left storage levels at 3.3 trillion cubic feet, 17% above levels from a year ago and 21% above the
five-year average for the same week. Many still expect storage levels to rise to 4 trillion cubic feet by the start of
the winter and challenge the record highs.

  "The amount of gas in inventory is just so high ... it's keeping the prices in this $2 range," said Tom Saal, a
broker at INTL FCStone Latin America in Miami. "Even though we've got some terrifically hot weather and low (weekly
surpluses), it's just kept prices from taking off."

  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 15:38 ET (19:38 GMT)

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

072016 19:38 -- GMT
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