DJ Traders: AGA Report's 119 Bcf Natural-Gas Build 'Bearish'
HOUSTON (Dow Jones)--The American Gas Association showed a build of 119 billion cubic feet of working gas from storage for the week ended May 11, which is considered bearish for the market, traders said.
The report was at the top end of industry expectations. A Dow Jones survey predicted a build of 100 Bcf to 120 Bcf build. The highest build ever - 120 Bcf - was in 1994.
The large injection again closed the year-on-year deficit to only 86 Bcf from last year, which is also considered bearish for the market.
Traders had earlier feared another tug-of-war this summer between storage operators and power generators for gas supply, a situation that led to a supply squeeze last year, and a runup of prices in April.
For the last two weeks, however, as the deficit shrunk so did demand, the supply deficit and the price of gas.
According to AGA, storage inventories rose Wednesday to just 7% below where they were a year ago and 7% below the five-year average.
In the first few minutes of trading after the AGA report was released, the June contract lost another 10 cents-11 cents.
At 2:08 p.m. EDT (1808 GMT), June was trading $4.36 a million British thermal units, down 29.3 cents, or 6.3% below the $4.653/MMBtu settlement Tuesday.
"That's a big number," said Kyle Cooper of Salomon Smith Barney, an energy analyst in Houston. Cooper expects the contract to fall to $4/MMBtu "or below."
"You need to take the price down to bring back the demand," he said.
The market has lost almost 21% of its value since mid-April, when the contract was trading around $5.516/MMBtu. Mild weather, huge storage additions and increased production have built supply well above demand, traders said.
A year ago, the AGA said 46 Bcf was added to storage during the same week. At that time, the contract was trading around $3.44-$3.68/MMBtu.
The large injection shows mid-May demand to be very light, coupled with the shoulder-month moderate weather and the relatively high expense for gas, a trader said. He sees fuel switching back to gas only when the front-month contract falls below $4/MMBtu.
For the week of May 11, the AGA said there was 1,077 Bcf of working gas in storage, compared with 1,163 Bcf a year ago. Storage was 33% full.
The five-year average for this week is 1,164 Bcf, the AGA said.
The report Wednesday showed a build of 31 Bcf in the producing region, at 37% full; a build of 75 Bcf in the consuming region east, at 28% full. A 13 Bcf build was reported in consuming region west, at 43% full.
-By John Edmiston; Dow Jones Newswires; 713-547-9209; john.edmiston@dowjones.com
(END) Dow Jones Newswires 16-05-01 |
