Dow Jones - End of Day Natural Gas Commentary

DJ Natural-Gas Prices Fall on Larger-Than-Expected Surplus -- Update


   By Timothy Puko


  NEW YORK--Natural-gas futures dropped back below $4 Thursday as record surpluses keep damping any risk of shortages
for the upcoming winter.

  Prices for the front-month November contract settled down 9.1 cents, or 2.3%, to $3.932 a million British thermal
units on the New York Mercantile Exchange. A third-straight day of losses marked the fifth time since August that
natural gas has sunk back after cresting above $4/mmBtu. It hasn't stayed above $4/mmBtu for more than three days since
early July.

  Thursday's biggest losses came after the U.S. Energy Information Administration said that producers added 112 billion
cubic feet of gas to storage for the week ended Sept. 26. The addition was 5 bcf larger than the 107 bcf consensus
average expectations of 18 analysts and brokers in The Wall Street Journal's weekly survey. It also set a record for
September and was the 12th-largest weekly addition in all of EIA records, which date to 1994.

  "The growth continues to look staggering," Mike Tran, an analyst at CIBC World Markets.

  Traders use the EIA update to gauge how quickly stockpiles are recovering from high demand that drained them to
11-year lows this winter. Record production from the domestic shale gas boom has helped create a historically quick
refill, with last week's addition just the most recent example. Four of the 12 biggest weekly storage additions ever
have come this year.

  "I think that a lot of the huge fear about no gas in storage [for the winter] might be a little bit overblown," said
Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston. "There's not much upside
in being in at $4.10 because that's already priced in the best-case scenario for the bulls."

  Last week's addition refilled stockpiles to 3.1 trillion cubic feet, within 12% of 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.

  Many advisory firms now expect more than 3.5 tcf in storage before the peak winter demand season for home heating.
While that is slightly below the five-year average going into winter, signs point to record production continuing
through next year, which bears think would cover demand except in the most extreme scenarios.

  "There's just a lot of [gas] around coming from a lot of different places," said Scott Gettleman, an independent
trader in New York.  Going forward, there's going to be a lot more drilling going on, so they're going to have a lot
more gas to store.

   FUTURES         SETTLEMENT   NET CHANGE
   Nymex November   $9.932        -9.1c
   Nymex December   $4.012        -7.7c
   Nymex January    $4.081        -7.2c
   CASH HUB         RANGE          PREVIOUS DAY
   El Paso Perm  $3.82-$3.84       $3.94-$4.01
   El Paso SJ    $3.80-$3.85      $3.945-$3.99
   Henry Hub     $3.85-$4.015        $4.10-$4.16
   Katy          $3.85-$3.90      $4.03-$4.105
   SoCal         $4.035-$4.185      $4.14-$4.245
   Tex East M3   $1.75-$1.94       $2.15-$2.25
   Transco 65    $3.885-$3.9275   $4.0525-$4.1125
   Transco Z6    $1.865-$1.98       $2.22-$2.28
   Waha          $3.82-$3.86       $3.97-$3.98


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


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  (END) Dow Jones Newswires

  October 02, 2014 15:22 ET (19:22 GMT)

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100214 19:22 -- GMT