DJ Natural-Gas Prices Fall on Larger-than-Expected Surplus -- Update
By Timothy Puko
NEW YORK--Natural-gas futures sank deeper Thursday morning after a weekly stockpile report showed a
larger-than-expected surplus.
Producers added 92 billion cubic feet of gas to storage for the week ended Sept. 5, the U.S. Energy Information
Administration said. The addition was 10 bcf larger than the 82 bcf consensus of analysts and brokers in The Wall
Street Journal survey. It was also larger than any of the projections, which topped out at 89 bcf.
Natural gas for October delivery immediately lost 1.7% after the data release, adding to incremental losses from
early-morning trading. The front-month contract recently traded down 14.3 cents, or 3.6%, for the day at $3.811 a
million British thermal units on the New York Mercantile Exchange.
Analysts probably underestimated the impact of the Labor Day holiday, when offices and factories are closed and not
consuming energy, said Kyle Cooper, managing director of research at IAF Advisors, a Houston consulting firm. Mr.
Cooper had expected an 89-bcf addition.
"It says that demand is highly sensitive," Mr. Cooper said. "If you have people off line and the heaters or (air
conditioning) isn't running, it has a profound effect."
Traders use the EIA update to gauge how quickly stockpiles are recovering from high demand that drained stocks to
11-year lows this winter. Last week's addition refilled stockpiles to 2.8 trillion cubic feet, about 14% lower than the
five-year average level for that week of the year. It had been at less than half of the average at the start of spring.
It has been a record pace for refilling storage, according to the EIA, and that has put pressure on prices in a mild
summer. The front-month natural gas contract lost 20% to start the season, and since mid-July it has retreated three
times after briefly breaking $4/mmBtu.
The gas market is oversupplied by more than 3.5 bcf a day, according to energy investment bank Tudor, Pickering, Holt
& Co. Without another severely cold winter to push demand, prices could keep dropping into 2015, its analysts said
Thursday in a note to clients.
It said 2015 prices of $3.50 a million cubic feet are starting to look more realistic than the previous forecast of
$3.75. Citigroup Inc., which had been much more bullish, also cut its forecast earlier this week by more than 13%.
Natural gas is likely to average $3.90/mmBtu for the second half of 2014 and for 2015, according to Citi Research
strategist Anthony Yuen.
It's clear now that the rally to start the week was just from technical trading and momentum, said John Woods,
president of JJ Woods Associates and a Nymex floor trader.
"Once the dust settles, you get back to basics and you start selling again," he said.
Write to Timothy Puko at Timothy.Puko@wsj.com
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(END) Dow Jones Newswires
September 11, 2014 12:57 ET (16:57 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
091114 16:57 -- GMT
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