DJ Natural Gas Gains on Technical Trade
By Timothy Puko
Natural gas rose to a two-week high as technical traders drove up prices despite data showing a heavy addition to
stockpiles.
The front-month October contract settled up 7.7 cents, or 2.9%, at $2.725 a million British thermal units on the New
York Mercantile Exchange. It was the largest one-day gain since Aug. 12 and took gas to its highest settlement since
Aug. 20.
The U.S. Energy Information Administration said producers added 86 billion cubic feet of natural gas to storage in
the week ended Aug. 28. That is in line with the average forecast of 18 analysts and traders surveyed by The Wall
Street Journal. But it is 40% larger than the five-year average.
The EIA update is widely considered one of the best measures of supply and demand for the natural gas market. The
addition shows supply outweighed demand by more than a third of what it usually does during this week of the year,
which has a five-year average addition of 60 bcf. The storage addition a year ago was 79 bcf.
The news briefly sent gas dipping into losses for the day, but prices rebounded as they neared an almost three-month
low point. Many had already sold in advance of the report, analysts said.
"When traders realized that price action was going to be unable to break (below) $2.65, they exited their (bearish)
positions," Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston, said in a
note. "This is akin to shooting yourself with small caliber bullets to slowly build up an immunity to larger calibers
of bullets."
Mr. Calder and others said prices will ultimately retreat in the coming weeks. Despite record demand for gas-fired
power, near-record production has natural-gas storage on pace to near a record before the high-demand winter-heating
season starts. That could force producers to sell at lower prices just to get rid of the gas
The 86-bcf addition brings storage levels to 3.2 trillion cubic feet, 18% more than a year ago and 3.7% above the
five-year average. That growing surplus has limited rallies in recent weeks despite high weather-related demand.
"There is just so much (supply) out there," said Scott Gettleman, an independent trader in New York. "If we can't
rally in late August, when are we going to rally?"
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
September 03, 2015 15:18 ET (19:18 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
090315 19:18 -- GMT
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