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Natural Gas Tumbles After Stockpiles Hit New Record
Prices settle down 3% after storage levels reach unprecedented 4 trillion cubic feet
By TIMOTHY PUKO
Updated Nov. 19, 2015 3:12 p.m. ET
http://www.wsj.com/articles/natural-gas-falls-as-stockpiles-likely-to-grow-1447947041
Natural gas prices sank Thursday afternoon as record high stockpiles and the chance they’ll keep growing led traders to shrug off a brief rally from a smaller-than-expected weekly surplus.

Natural gas storage levels reached an unprecedented 4 trillion cubic feet last week, the U.S. Energy Information Administration said late Thursday morning. And weather--though it is not as mild as once expected--is warm enough that many analysts are expecting stockpile additions to continue for at least another week, two weeks beyond what is normal, said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston.

“The trend is down and people are looking to sell rallies,” said Scott Gettleman, an independent trader in New York. “Mild weather, big inventories, we’re just setting up for lower.”

Prices for the front-month December contract settled down 7.1 cents, or 3%, at $2.276 a million British thermal units on the New York Mercantile Exchange. It is the largest one-day percentage decline since gas sank to a three-year low on Oct. 26. It has lost 4.6% over a three-session losing streak.

Prices had seen small gains immediately after the EIA’s data release. It showed producers added 15 billion cubic feet of natural gas to storage in the week ended Nov. 13, 2 bcf less than the average forecast from analysts and traders surveyed by The Wall Street Journal.

Because storage levels are high, traders have been reluctant to send more gas to storage and are instead selling it immediately on the spot market, said Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston. Physical gas for next-day delivery at the Henry Hub in Louisiana averaged $2.1463/mmBtu Thursday, more than 13 cents below the futures settlement.

As the spot market bears the brunt of the ongoing gas glut, it may reduce the buildup coming later and the pressure on futures prices, Mr. Calder added.

“We’re taking some pain now to feel less oversupplied in the future,” he said.

But that ultimately could not outweigh the fear of record supply combined with the potential tepid winter heating demand, analysts said. There is still fear that mild temperatures could extend throughout the winter in the northern U.S. and Europe because of the weather phenomenon El Nino, which analysts at Goldman Sachs Group Inc. highlighted in their note on commodities that was sent to reporters on Thursday.


The bank forecasts higher natural gas prices, but warns that the big risks are on the downside. It sees prices at $2.50/mmBtu this quarter and averaging $2.85/mmBtu next year. But a warm winter and limited heating demand because of El Nino, and potential increases in Northeastern gas production coming next year, makes it more likely those forecasts are too high than too low, the bank’s researchers said.

Write to Timothy Puko at [e-mail]