DJ Natural-Gas Prices Fall on Larger-Than-Expected Surplus
By Timothy Puko
Natural-gas futures closed lower Thursday for the third straight session after a weekly stockpile report showed a
larger-than-expected surplus.
The front-month October contract settled down 2.8 cents, or 0.7%, to $3.819 a million British thermal units on the
New York Mercantile Exchange. Prices have fallen 6% this week, undoing nearly all of a two-week rally that had seen
natural gas peak above $4/mmBtu on Friday.
Producers added 79 billion cubic feet of gas to storage for the week ended Aug. 29, the U.S. Energy Information
Administration said. The addition was 6 bcf larger than the 73-bcf consensus average expectations of analysts and
brokers surveyed by The Wall Street Journal.
Traders use the EIA update to gauge how quickly stockpiles are recovering from high demand that drained them to
11-year lows this winter. Last week's addition refilled stockpiles to 2.7 trillion cubic feet, within 16% of the
five-year average level for that week of the year. The deficit had been greater than 50% of that average at the start
of spring.
"It's hard not to be bearish, and I'd say that's true for even the next week or two," said Mark Martov, an
independent trader in New York. "I have this gut feeling that we are going to test those lows again and we do have a
super amount of supply."
Gas from the unconventional drilling boom has overwhelmed tepid demand this summer. Mild weather means air
conditioners aren't running as strongly, limiting demand for gas-fired power. That has allowed producers to refill
stockpiles at a record rate with little sign of slowing down.
Last week's addition was 40% larger than the five-year average surplus for that week, according to EIA data. It has
said additions need to outpace the average by 30% every week to refill stockpiles adequately for the winter.
Mr. Martov said he is holding part of his bet that prices will fall to around $3.75/mmBtu within the next week but
closed out half of that position because of the uncertainty facing the market. After prices plunged 20% to start the
summer, they have twice bounced higher from declines below $3.80/mmBtu. Power plants jump in to buy as prices fall and
many traders also are thinking about the risk from heating demand increases during the winter, making it unclear which
way prices will turn this fall, Mr. Martov and others said.
Many have retreated to trades focused on contracts several months in the future, they said. Others are biding time,
harboring an instinct that gas shouldn't be below $4 with winter heating season on the horizon, they said.
"People got kind of shaken up by the drop on Tuesday," said Frank Clements, co-owner of Meridian Energy Brokers Inc.
outside New York. "People are thinking maybe they'll take their lumps now and get back in again later."
FUTURES SETTLEMENT NET CHANGE
Nymex October $3.819 -2.8c
Nymex November $3.869 -2.5c
Nymex December $3.953 -2.3c
CASH HUB RANGE PREVIOUS DAY
El Paso Perm $3.78-$3.805 $3.80-$3.83
El Paso SJ $3.77-$3.83 $3.82-$3.85
Henry Hub $3.88-$3.92 $3.91-$3.955
Katy $3.80-$3.90 $3.86-$3.905
SoCal $3.93-$4.19 $4.00-$4.18
Tex East M3 $2.55-$2.77 $2.87-$2.995
Transco 65 $3.83-$3.88 $3.845-$3.95
Transco Z6 $2.73-$2.80 $3.04-$3.15
Waha $3.82-$3.84 $3.83-$3.8675
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(END) Dow Jones Newswires
September 04, 2014 15:20 ET (19:20 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
090414 19:20 -- GMT
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