DJ Natural Gas Rebounds Despite Data Showing Second-Largest Surplus on Record
By Timothy Puko
Natural gas prices dipped, then rebounded to near unchanged as traders who respond to charts boosted the market
despite new data showing the second-largest weekly surplus on record.
Prices bounced after falling just past a one-month intraday low of $2.557 a million British thermal units. That could
have been enough to scare a slew of bearish traders into quickly unwinding pre-existing bets that profit when the
market falls, traders and analysts said. Such trades are closed out by buying futures to cover the position, which can
feed into a price rally when it is done in large numbers at the same time.
The front-month July contract lost 0.8 cent, or 0.3%, to $2.626 a million British thermal units on the New York
Mercantile Exchange. Prices had fallen as much as 3% in the morning before, flip-flopping around unchanged the rest of
the day.
The low point came after the U.S. Energy Information Administration said storage levels grew by 132 billion cubic
feet in the week ended May 15. That is the largest weekly surplus in 12 years and the second largest in EIA records
that date back to 1994.
Many traders and analysts said that oversupply will eventually push another fall in gas prices. They said Thursday's
rebound was largely a technical move and not a sign that many money managers are interested in betting prices will
rise, also known as "getting long."
"We're just respecting an old low," said Dean Hazelcorn, trader at the brokerage Coquest Inc. in Dallas. "People are
not reloading their guns to get long."
The surplus is more than 40% larger than the 92-bcf five-year average addition for the week and also more than the
123-bcf median average from forecasters surveyed by The Wall Street Journal. It suggests the market was oversupplied by
about 3 bcf a day last week, according to analysts' estimates.
Last week's addition brought storage levels to 2.2 trillion cubic feet, 51% more than a year ago and 1% above the
five-year average.
The EIA storage data is widely considered one of the best measures of supply and demand for the natural-gas market.
Gas prices have been too high to convince power plants to use more of it and absorb near-record supplies, and Memorial
Day also probably cut demand by keeping businesses and schools closed, analysts said.
"The market was ready for a large injection, but it's still extremely bearish," said Kent Bayazitoglu, analyst at
Gelber & Associates. "We're not going to see (a) strong rebound."
Despite all that, it is difficult to bet on lower prices in early June, said John Woods, president of JJ Woods
Associates and a Nymex trader. There is still a chance that the upcoming summer could have a long spell of hot weather,
ramping up demand for gas-fired power to run air conditioning, he said.
"You sell this number, and you have to pray that something drastic happens, that we have the coldest summer we've had
in a long time," Mr. Woods said.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
June 04, 2015 15:31 ET (19:31 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
060415 19:31 -- GMT
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