Natural-gas futures pare their gains Thursday as traders look past a
bigger-than-expected drop in U.S. gas stockpiles and focus on weakening
demand in the weeks ahead.
The Energy Information Administration said natural gas
inventories fell a bigger-than-expected 94 billion cubic feet last week.
The decline places stockpiles below the five-year average level for the
first time in 19 months, a major shift for a market that for years has
been burdened with swelling supplies.
Analysts, however, say a sizeable stockpile drop had already
been priced for the week, and traders took the opportunity to close out
some bets on higher prices. Natural gas for May delivery recently rose
1.6 cents, or 0.4%, to $3.916 per million British thermal units on the
New York Mercantile Exchange. Prices traded closer to $3.94 prior to the
10:30 a.m. EDT report.
"This week's inventory has been well priced into the market
for the last week or so," said Dominick Chirichella, analyst at the
Energy Management Institute in New York. "Everyone's been expecting a
big number and we got it. Everything about the number is bullish,
everything about the inventory situation is bullish, but now we're
finally entering the shoulder season."
The shoulder season is the period of diminished natural gas
use during the spring, as demand for heating fueled by natural gas wanes
but summertime cooling needs have yet to rise. Natural gas futures are
down more than 4% from a settlement high of $4.068 last week, as weather
forecasts point to milder temperatures for the next month.
"The strongest warming of the season so far should bring 60s
to the Northeast and 70s to the Mid-Atlantic early next week," according
to Commodity Weather Group. The private forecaster added that it sees
"cooler risks" during the next seven to nine days.
On Sunday, the National Oceanic and Atmospheric Administration
called for above-normal temperatures across large swaths of the country
through April.
Natural gas stockpiles now stand at 1,687 billion cubic feet,
placing them 2.1% below the five-year average for this time of year.
That's the first time inventories were under the five-year average since
September 2011, amid a colder-than-average winter.
Natural gas stockpiles are 31.2% below the level this time a
year ago. Then, one of the mildest winters on record squelched gas
demand and pushed stockpiles to record highs.