DJ Natural Gas Has Largest Rally Since January on Smaller-than-Expected Surplus
By Timothy Puko
Natural gas prices surged to their largest one-day gains since January after government data showed stockpiles grew
less than expected.
Prices for the front-month June contract settled up 14.5 cents, or 5.6%, to $2.751 a million British thermal units on
the New York Mercantile Exchange. The gains started from a low point, having fallen by 1.5% in the morning as traders
expected one of the largest surpluses on record for April.
That didn't materialize, sparking the type of rally that is more common for gas in the dead of winter when heating
demand surges. The settlement is the highest since March 24 and halts, at least temporarily, what had been a month-long
grind downward.
The U.S. Energy Information Administration said storage levels grew by 81 billion cubic feet in the week ended April
24. That is 6 bcf less than the 87-bcf consensus average of forecasters surveyed by The Wall Street Journal.
The EIA update is widely considered one of the best measures of supply and demand for the natural gas market. This
draw would indicate slightly smaller supply or larger demand than expected.
Traders have been betting big in favor of falling prices, according to regulatory figures that track money managers'
trades. There have been more than three positions in favor of falling prices for every two positions that would benefit
on rising prices.
Many of those bears have been trying to get out in the past week, said Michael Doyle, a broker at Eclipse
International Inc. in New York. And EIA data that suggested lower supply or higher demand than expected could have
amped up that effort.
"It's really a case of too many people on one side of the boat," he said. "If any one person wants to cover, then
it's going to rally like that."
Demand is low in the spring when comfortable weather leads people to turn off their heat for the year. But it is
likely to pick up in the weeks to come as they start to fire up air conditioners and power plants, many of which burn
natural gas, run more to meet the demand.
"Going into the (summer) season, nobody wants to sell $2.50 gas," said John Woods, president of JJ Woods Associates
and a Nymex trader. "I still like this going higher."
Mr. Woods said he has placed bullish bets on gas futures that will pay off if they rise past $2.80/mmBtu.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
April 30, 2015 15:13 ET (19:13 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
043015 19:13 -- GMT
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