THE WALL STREET JOURNAL

Natural Gas Falls as Stockpiles Rise

 

U.S. stockpiles grew more than expected last week
By TIMOTHY PUKO
Updated July 14, 2016 3:25 p.m. ET


Natural gas prices inched lower on Thursday, after government data showed U.S. stockpiles
grew more than expected last week.


The U.S. Energy Information Administration said natural-gas inventories grew by 64 billion
cubic feet last week, compared to the 56 bcf expected by forecasters surveyed by The Wall Street
Journal. The report is a widely watched measure of supply and demand. A larger-than-expected
addition to storage likely indicates more supply or smaller demand than expected.


Natural gas futures for August delivery settled down 1 cent, or 0.4%, to $2.727 a million British
thermal units on the New York Mercantile Exchange. Trading stayed within a 6-cent range.


Prices initially inched higher after the data. Many people are betting that with production coming
off of record highs and the number of working gas-drilling at historic lows, a glut left over from
the winter will ease as rising demand from power and industrial plants burns it off.


The balance has already shifted enough that weekly surpluses have been coming in below
average. That is leading many to bet the amount of gas in storage will fall below levels from a
year ago before the winter, analysts and traders said.


“You still have enough people out there who believe we’re going to end up below last year’s
inventory level, or even ... below the five-year average,” said Zane Curry, a gas analyst at
Mobius Risk Group in Houston. “Personally I can’t do any reasonable math that gets me there.”


Storage levels were still 19% above levels from a year ago and 22% above the five-year average,
rising to 3.2 trillion cubic feet as of July 8, EIA said. Many still expect storage levels to rise to 4
trillion cubic feet by the start of the winter and challenge the record highs.


That will keep putting pressure on prices, analysts and traders said. Many are waiting to see if
hot weather pans or, or if hotter weather arrives to drive the demand for gas-fired power to run
air conditioners that bullish gas traders are looking for, analysts said.


Prices must hold above $2.66/mmBtu for the bulls who rushed into the market in recent weeks,
said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading
desk. The market is already down 8.7% from the one-year high it settled at July 1.


Fall “below and all heck will break out as [buyers] move to liquidate,” Mr. Morton said.


FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND
MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES
MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY
RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT
IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE
RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL
DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED
IN THE PRICE OF THE UNDERLYING FUTURES.