Natural Gas Investors In Denial

Natural Gas Declines After Stockpiles Drop Less Than Forecast

” Investors have to face this ” new normal”, Jack A.Bass

The Energy Information Administration said stockpiles dropped 26 billion cubic feet in the week ended Dec. 26 to 3.22 trillion. Analysts estimated a decline of 34 billion while a survey of Bloomberg users predicted a withdrawal of 30 billion.

“It’s another bearish withdrawal in a series of bearish withdrawals,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “The last nine months we have been oversupplied. The bearish fundamentals already had a head start and they are supercharged by mild weather.”

Natural gas for February delivery slid 8.1 cents, or 2.6 percent, to $3.013 per million British thermal units at 12:04 p.m. on the New York Mercantile Exchange. Gas traded at $3.041 before the storage number was released at noon. Volume was 50 percent below the 100-day average. Prices are down 29 percent this year, heading for the first annual drop since 2011.

The EIA released the supply report a day early because of the New Year’s holiday.

The storage withdrawal was the smallest for the last week of the year since 2005. Supplies fell 108 billion the same week last year while the five-year average decline is 114 billion.

A deficit to the five-year norm narrowed to 2.5 percent from 4.9 percent the previous week. Supplies were 7.8 percent above year-earlier inventories, up from a surplus of 4.8 percent in last week’s report.

“The market keeps coming under pressure without the seasonal demand support,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

Heating Season

Stockpiles may end the heating season in March, when storage levels bottom out as the peak-demand period ends, at 1.6 trillion cubic feet, double year-earlier levels, McGillian said.

This December is about 8.3 percent warmer than a year earlier based on natural-gas weighted heating degree days, Matt Rogers, president of Commodity Weather Group LLC, said in an e-mail. The number of heating degree days next month may drop to 975, down 6.7 percent from January 2014, he said.

Weather models indicate a stronger cold front pushing across the Midwest and Northeast next week before giving way to more seasonal readings on Jan. 10 through Jan. 14, a Commodity Weather report today showed. The rest of the U.S. will see mostly average or higher readings during the period.

New York

Manhattan’s low on Jan. 9 will drop to 19 degrees Fahrenheit (minus 7 Celsius), 8 below normal, before rising three days later to 35, according to AccuWeather Inc. in State College,Pennsylvania. About 49 percent of U.S. households use gas for heating.

Marketed gas production will expand in 2015 for the 10th consecutive year as new wells come online at shale deposits such as the Marcellus and the Utica in the East, the EIA said in its Dec. 9 Short-Term Energy Outlook. Output will rise 3.1 percent to 76.68 billion cubic feet a day, a record for the fifth straight year.

Speculators cut net-long positions in four benchmark gas contracts by 23,613, or 87 percent, to 3,648 in the week ended Dec. 23, the least since the market was net short in January 2012, a U.S. Commodity Futures Trading Commission report yesterday showed.

Long-only positions fell 4.2 percent to the least since November 2011, while shorts rose 3 percent.

“Right now we have more to go in this selloff; that is what the record amount of gas is doing to the U.S.” said McGillian.

 

 

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