DJ Natural-Gas Prices Dive on Smaller-Than-Expected Stockpile Drain
By Timothy Puko
Natural-gas futures dropped Thursday after federal data showed U.S. storage levels fell less than expected last week.
Storage levels shrank by 160 billion cubic feet in the week ended Feb. 6, the U.S. Energy Information Administration
said. The drain was 10 bcf less than the 170-bcf consensus average of 16 forecasters surveyed by The Wall Street
Journal. The EIA update is widely considered one of the best measures of supply and demand, and this draw would
indicate larger supply or lower demand than expected.
That caused prices to drop sharply. The front-month March contract settled down 8.4 cents, or 3%, at $2.713 a million
British thermal units on the New York Mercantile Exchange. It snapped a three-session winning streak that came from
colder weather and rising expectations for demand.
Natural-gas analysts have overestimated storage withdrawals three weeks in a row, a trend that likely added more
pressure to sell, analysts said. It reinforces the idea that the supply-demand balance has weakened in a fundamental
way, even beyond what is obvious at the surface, said Tim Evans, analyst at Citi Futures Perspective in New York, in a
note.
"Smaller-than-average withdrawals in cold conditions are harbinger of things to come," said Aaron Calder, senior
market analyst at energy-consulting firm Gelber & Associates in Houston in a note. "There is a lot of natural gas
available and the market is struggling to figure out what to do with it."
Temperatures more than 15 degrees Fahrenheit below normal are covering everywhere between Ohio and New Hampshire and
will linger through the weekend, according to MDA Weather Services in Maryland. Two shots of Arctic air and a
"high-impact" winter storm are headed for New England this weekend, according to Weather Services International in
Andover, Mass.
Half of U.S. homes use natural gas for heat, making winter cold a big driver for demand. And far below-normal
temperatures are now expected to spread over two-thirds of the country by next week, countering initial forecasts that
said they would be contained to the East. Now meteorologists expect them to cover everywhere east of the Rockies for
most of the month, the forecasts said.
That had initially pushed gains in the morning. And a cold February could increase stockpile withdrawals and prices
the rest of the month.
The drain brought storage levels to 2.3 trillion cubic feet, 31% more than a year ago and 0.5% below the five-year
average. Analysts expect stockpiles to surge past the five-year average in the coming weeks.
That is because producers are becoming more efficient, and they will be able to extract more gas at lower costs,
allowing production to rise even as commodity prices fall, analysts and the EIA have said. EIA on Tuesday raised its
expectations for production, saying it will average 72.8 bcf in 2015. That is up 0.6% from what the agency forecast a
month ago and up 3.7% from what the industry produced in 2014.
"Really significant gains during these (production levels) are going to be hard to come by," said Gene McGillian, an
analyst at Tradition Energy.
Write to Timothy Puko at tim.puko@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwireshttp://online.wsj.com?mod=djnwires">http://online.wsj.com?mod=djnwires
>
(END) Dow Jones Newswires
February 12, 2015 15:52 ET (20:52 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
021215 20:52 -- GMT
------
No comments:
Post a Comment