DJ Natural Gas Slumps as Pace of Supply Growth Accelerates
By Christian Berthelsen
Natural gas futures posted their largest one-day percentage drop in more than a month, as the market comes to grips
with accelerating supply growth and warmer-than-expected weather forecasts for early May.
The May contract fell 9.8 cents, or 3.7%, to settle at $2.536 a million British thermal units on the New York
Mercantile Exchange. The loss, combined with Friday's decline, wiped out much of last week's rally. The market opened
down and continued to grind lower over the course of the trading session.
Analysts have been noting the accelerating pace of production and growth in stored supplies, with the industry adding
between 3 billion and 6 billion cubic feet of output above demand levels every day.
"We have a lot of gas coming out of the ground," said Gene McGillian, senior analyst with futures brokerage Tradition
Energy in Stamford, Conn.
Teri Viswanath, a strategist at BNP Paribas, said the market has shed more than 15% since late February while
toggling between weekly gains and losses, owing to uncertainty over the pace of inventory restocking. But now, with the
trend becoming more pronounced, stored supplies are expected to begin growing much faster than last year's pace.
"The fact remains that the industry simply cannot accommodate a new record build in inventories," Ms. Viswanath said
in a note.
Meanwhile, forecasts are calling for a chill to set in over much of the Midwest and Northeast through the end of
April, which could provide a mild boost to demand for gas to heat homes. But in the first days of May, a swath of
above-normal temperatures over the Midwest is expected to gain strength.
Financial speculators such as hedge funds and other money managers are growing strongly bearish on the natural gas
market, with bets that prices will fall reaching a three-year high as of Friday, according to data from the U.S.
Commodity Futures Trading Commission.
Thanks to continued robust production from domestic shale fields, natural gas supplies have been growing rapidly.
Inventories last week rose 63 billion cubic feet to a total 1.5 trillion cubic feet, 82% above year-ago levels and just
8.6% below the five-year average.
Write to Christian Berthelsen at christian.berthelsen@wsj.com
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(END) Dow Jones Newswires
April 20, 2015 15:27 ET (19:27 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
042015 19:27 -- GMT
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