DJ Natural Gas Prices Sink on Smaller-Than-Expected Stockpile Drain
By Timothy Puko
Natural gas closed at its lowest price in more than 2 1/2 years Thursday after federal data showed U.S. storage
levels fell far less than expected last week.
Storage levels shrank by 115 billion cubic feet in the week ended Jan. 30, the U.S. Energy Information
Administration said. The drain was 6 bcf less than the 121-bcf consensus average of 18 forecasters surveyed by The Wall
Street Journal.
Prices sank as soon as the data were released, and a brief rally fell flat in the early afternoon. The front-month
March contract settled down 6.2 cents, or 2.3%, at $2.60 a million British thermal units on the New York Mercantile
Exchange. This is the lowest front-month settlement since June 21, 2012, when gas fell to $2.582/mmBtu.
The storage update is considered the most definitive measure of how supply is balancing with demand, and this
withdrawal indicates that supplies are healthy even during the peak of the winter heating season. The withdrawal was
nearly a third lower than the 165-bcf five-year average for this week of the year, according to EIA data. Half of U.S.
homes use natural gas for heat, but record supply has overwhelmed the demand spike this winter.
The drain brought storage levels to 2.4 trillion cubic feet, 24% more than a year ago and 1% below the five-year
average.
Analysts expect stockpiles to keep rising compared with their historic levels and surpass their five-year averages
before the spring. At this pace, storage likely would fill to its practical capacity some time in the fall, which
already has caused prices to plummet. Gas is now down 42% from its November peak.
"There is no reason whatsoever" for prices to turn around, said John Woods, president of JJ Woods Associates and a
Nymex trader. "The only way this is going to turn around is with...increased consumption in the industrial sector and
that's just not happening (soon)."
Updated weather forecasts from Thursday are showing colder-than-expected weather settling in for the next two
weeks in some of the country's biggest heating markets. But traders have also grown skeptical of forecasts for
sustained cold that haven't reliably come through this winter, said Tom Saal, a broker at INTL FCStone Latin America in
Miami.
"Traders are getting jaded with these cold forecasts," he added. "They don't really materialize. You get the cold
weather for a couple days and then it's gone."
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
February 05, 2015 14:54 ET (19:54 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
020515 19:54 -- GMT
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