Dow Jones Natural Gas - Post Storage Report Commentary

DJ Natural Gas Jumps After Larger-than-Expected Withdrawal From Stockpiles


  By Timothy Puko


  Natural gas prices sharply added to gains on Thursday after stockpiles shrank by double what analysts expected.

  The U.S. Energy Information Administration said storage levels fell by 18 billion cubic feet in the week ended March
27. That is 9 bcf more than the 9-bcf consensus average of 18 forecasters surveyed by The Wall Street Journal.

  The EIA update is widely considered one of the best measures of supply and demand. This draw would indicate lower
supply or larger demand than expected. It is nearly on par with the 22-bcf five-year average for the week, which may be
considered a surprise bullish for prices, which have been capped by near-record supply.

  The front-month May contract recently traded up 6.8 cents, or 2.6%, at $2.673 a million British thermal units on the
New York Mercantile Exchange. Prices had been trading near their lows from 2012 earlier in the morning.

  The bullish surprise added fuel to a small rally supported by how far prices had fallen earlier, a broker and trader
said. As prices near lows that haven't been seen in several years, traders often balk at pushing them even lower. That
sentiment leads to more buying, and then data like this showing unexpectedly low supply or high demand reinforces the
momentum.

  "Any time [gas] gets below [$2.]60, you look at your risk-reward, you look at weather patterns, and I'm bullish when
you get to that number," John Woods, president of JJ Woods Associates and a Nymex trader. "People aren't ready for low
natural gas."

  The addition brought storage levels to 1.5 trillion cubic feet, 75% more than a year ago and 12% below the five-year
average.

  Weather is another factor temporarily boosting the market. There are still some below-normal temperatures coming next
week, potentially leading to "sneaky demand" for heating fuel, Commodity Weather Group LLC said in its Thursday
forecast.


  Write to Timothy Puko at tim.puko@wsj.com


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  April 02, 2015 11:09 ET (15:09 GMT)

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