DJ Natural Gas Flops as Traders See Winter's End
By Timothy Puko
Natural gas prices retreated Thursday as traders focused on the coming end of winter and ignored news of a March
record for weekly storage withdrawals.
The front-month April contract settled down 9 cents, or 3.2%, at $2.734 a million British thermal units on the New
York Mercantile Exchange. The losses were large enough to nearly cancel out all of Wednesday's gains, which had been
the best of the month so far.
The U.S. Energy Information Administration said storage levels fell by 198 billion cubic feet in the week ended March
6. That is the largest weekly drain for March in EIA records that day through 1994. It also beat analysts' and traders'
expectations by seven bcf.
While a number like that suggests demand was much stronger than expected, traders may have been waiting for it to
pass so they could sell in anticipation of softer demand to come, analysts said. Meteorologists are predicting
temperatures more than 15 degrees Fahrenheit above normal this weekend in places like Denver and Minneapolis. And
springlike temperatures could be the end of winter, causing both demand for heating fuel and natural gas prices to
plummet.
Thursday's update "is a big number. But considering the temperature, it's not very bullish," said Kyle Cooper,
managing director of research at IAF Advisors, a Houston consulting firm. "This is definitely kind of it for winter."
Temperatures are likely to be so warm that the country could stop draining stockpiles and start adding to them as
early as next week, about two weeks before the traditional start of restocking season, Mr. Cooper and other analysts
said.
"The mere hint of (that) appears to be reinvigorating the seasonal slide in prices," BNP Paribas SA said in a note.
EIA said earlier this week that the country is likely to produce 78 bcf of gas a day this year, a 5% increase from a
year ago and a 1.4% increase over EIA's expectations from just a month ago. That growth is so strong that natural gas
producers could test the storage capacity nationwide and will likely have to cut prices so some of the gas can be used
immediately in power plants rather than fill storage, analysts have said. Coal, gas's primary competition for power
plant fuel, is still about 5% cheaper than gas, and gas prices will have to fall accordingly to compete, CIBC World
Markets said in a note Thursday.
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(END) Dow Jones Newswires
March 12, 2015 15:13 ET (19:13 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
031215 19:13 -- GMT
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