DJ Natural Gas Hits One-Month Low on Heavy Surpluses
By Timothy Puko
Natural-gas prices set a fresh one-month low Friday as the market keeps reeling from a larger-than-expected glut.
The front-month July contract lost 3.6 cents, or 1.4%, to $2.59 a million British thermal units on the New York
Mercantile Exchange. Gas prices have fallen 11 times in 14 sessions and lost nearly 14% since closing at a four-month
high on May 15.
Weekly surpluses have exceeded expectations for two weeks in a row, signaling the market may be oversupplied by about
3 billion cubic feet a day, according to analysts' estimates. The U.S. Energy Information Administration said Thursday
last week's surplus set a record at 132 bcf. That is 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.
"The fundamental picture remains weak," said Gene McGillian, an analyst at Tradition Energy. "There's really no
reason to bull the market up."
Supply fell in May, the second monthly drop this year, said Bentek Energy, an analytics and forecasting unit of
Platts, late Thursday. The EIA's data, which is different, said monthly production had already dropped twice this year,
in both January and March.
But Bentek also said that production will stay at a record pace of about 73 bcf a day for the year. It blamed the
monthly fall on temporary pipeline and processing plant shutdowns.
Power plants -- the most likely consumer to buy large amounts of gas as prices fall -- aren't absorbing the
oversupply quickly enough to balance the market, according to bank analysts. An average price of $2.71/mmBtu since
April hasn't been enough to get power plants to switch from coal to gas, and that is going to put downward pressure on
prices through the fall, Societe Generale SA analyst Breanne Dougherty said in a note late Thursday. Earlier this week,
BNP Paribas SA said the issue would probably put a $2.50/mmBtu ceiling on Henry Hub prices through the summer.
Momentum and chart traders may also turn bearish on the market, according to Societe Generale. Many analysts and
traders think that gas futures are moving largely on technical factors this spring. July futures rebounded to unchanged
Thursday despite news of the record surplus. That happened after prices hit a one-month intraday low of $2.556. If they
fall past that, watch for a "deeper correction," Societe Generale says, echoing the bearish predictions of other
brokers and analysts.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
June 05, 2015 15:11 ET (19:11 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
060515 19:11 -- GMT
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