Dow Jones - Natural Gas Trading At Seasonal Low From Heavy Surpluses

DJ Natural Gas Trading at Seasonal Low from Heavy Surpluses


   By Timothy Puko


  Natural gas is trading around its three-year low after getting little help from news of a heavy addition to storage.

  The U.S. Energy Information Administration said producers added 98 billion cubic feet of natural gas to storage in
the week ended Sept. 25. That is 2 bcf lower than the average forecast of 17 analysts and traders surveyed by The Wall
Street Journal, which traders consider only a small miss.

  The EIA update is widely considered one of the best measures of supply and demand for the natural gas market. Tudor,
Pickering, Holt & Co., a Houston investment bank, had estimated before the data that a weekly addition of this kind
would equate to about 3 bcf of oversupply last week.

  Natural gas for November delivery pared losses after the news. It is still down for the day by 3.1 cents, or 1.2%, at
$2.493 a million British thermal units on the New York Mercantile Exchange. It had fallen as far as $2.472/mmBtu
earlier in the morning as traders expected the big addition.

  "It's pretty much factored into the price," said John Woods, president of JJ Woods Associates and a Nymex trader. "We
really haven't gotten any better."

  Prices are still at their lowest since late April when it set a three-year low settlement of $2.49/mmBtu and intraday
price of $2.443/mmBtu.

  The U.S. Information Administration said late Wednesday that gas production in the continental U.S. was virtually
unchanged in July despite prices that have lingered near that multi-year low all summer. Total withdrawals were 82.32
billion cubic feet that month, compared to 82.29 in June. Production in July was 5.4% above the same period a year ago.

  "We went through that four month window where (prices) just went sideways and they didn't stop pumping that whole
time," said Dean Hazelcorn, trader at the brokerage Coquest Inc. in Dallas. "This could be one of those ugly seasons"
for futures.

  That healthy production has traders and analysts expecting that the country could hit a record for the amount of
natural gas in storage before the start of winter heating season, usually the market's largest driver for demand.
Weather forecasts are showing a mild start to fall, and without cold weather to get heaters turned on in the north, gas
could pile up in surplus.

  The 98-bcf addition put stockpiles at 3.5 trillion cubic feet. That is 4.5% above their five-year average level for
this week of the year and 15% above their level at this time a year ago.

  Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.37/mmBtu, compared with
Wednesday's range of $2.44-$2.49. Cash prices at the Transco Z6 hub in New York last traded at $2.20/mmBtu, compared
with Wednesday's range of $2.30 to $2.50.


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


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  (END) Dow Jones Newswires

  October 01, 2015 11:00 ET (15:00 GMT)

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