Dow Jones Natural Gas - Prices Sink On Smaller Than Expected Stockpile Drain

DJ Natural Gas Prices Sink on Smaller-Than-Expected Stockpile Drain


   By Timothy Puko


  Natural gas prices dropped to a new two-year low on Thursday after federal data showed U.S. storage levels fell less
than expected last week.

  Storage levels shrank by 94 billion cubic feet in the week ended Jan. 23, the U.S. Energy Information Administration
said. The drain was 17 bcf less than the 111-bcf average of 20 forecasters surveyed by The Wall Street Journal.

  The smaller-than-expected drain caused prices to drop sharply. The front-month March contract recently traded down
14.7 cents, or 5.2%, at $2.695 a million British thermal units on the New York Mercantile Exchange. The contract had
been trading around unchanged before the data. This is the lowest front-month price since Sept. 10, 2012, when gas fell
to $2.682/mmBtu.

  The drain was 44% lower than the five-year average for that week of that year. That is another reminder of how
severely oversupplied the market is, said Stephen Smith, an energy consultant based in Natchez, Miss. UBS AG cut its
price forecast for gas earlier this week, saying the market is oversupplied by about 2.5 bcf a day.

  "You might get weather situations that make it ... look like a balanced market," Mr. Smith said. "The truth is,
underlying this whole thing, you can't grow production (at this) rate and not be oversupplied."

  The drain brought storage levels to 2.5 trillion cubic feet, 15% more than a year ago and 3% below the five-year
average.

  "What's more, the short-term weather outlook suggests that the call on storage will likely remain comparatively
light" in the weeks to come, Teri Viswanath, a natural-gas strategist at BNP Paribas SA in New York, said in a note
earlier Thursday.

  Analysts expect stockpiles to keep rising compared to their historic levels and surpass their five-year averages
before the spring. Early pipeline data suggests a 125-bcf withdrawal for next week's storage update, Ms. Viswanath
said, and that would be a quarter lower than the five-year average for the week, according to EIA data.


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


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  (END) Dow Jones Newswires

  January 29, 2015 11:20 ET (16:20 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

012915 16:20 -- GMT
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