DJ Natural Gas Retreats on Expectations for Strong Supply
By Timothy Puko
Natural gas prices were giving back most of the prior session's gains on expectations for strong supply.
Natural gas for July delivery fell 6.9 cents, or 2.4%, at $2.781 a million British thermal units on the New York
Mercantile Exchange.
Money managers have been strongly positioned in favor of falling gas prices, but the market has been resilient. Power
plants have ramped up demand and there are signs that production may be in slight decline after a period of rampant
growth. Prices rose 3% on Thursday as government data showed the smallest weekly surplus in more than two months and
analysts said the market had come into balance.
But many believe that balance won't last. The U.S. Energy Information Administration also said on Thursday that
production had grown 1% this week despite pipeline shutdowns for maintenance. Production is back at its near-record
pace of 72 billion cubic feet a day, EIA said, citing the data provider Bentek Energy.
Friday's quick reversal in the market is also a sign that traders haven't fundamentally changed that widespread
bearish view, analysts said.
Money managers have had about five bearish positions for every three bullish positions, and that balance can lead
prices to rise quickly if bearish traders close out their positions by buying back a gas futures contract.
Many likely did on on Thursday to protect themselves against the bullish government data on gas stockpiles, analysts
said. And so, with that news now in the past, a retreat in prices on Friday is probably a sign those traders are
reestablishing a bearish trade or that the larger expectation is still that the market is oversupplied, analysts said.
"With the production levels we're seeing, the market can't sustain rallies. This is another example," said Gene
McGillian, an analyst at Tradition Energy.
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.77/mmBtu, compared with Thursday's
range of $2.775-$2.805. Cash prices at the Transco in New York last traded at $1.43/mmBtu, compared with Thursday's
range of $2.30 to $2.40.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
June 26, 2015 10:15 ET (14:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
062615 14:15 -- GMT
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