Wall Street Journal
Natural Gas Rises as Investors Bet on a Bottom

Thursday, April 07, 2016

Natural gas prices were rising as investors tried to bet the glutted market has hit a bottom.

Prices have been lingering at historic lows because of a glut in storage. The U.S. Energy Information Administration said Thursday stockpiles grew another 12 billion cubic feet last week, a time of year when stockpiles usually fall. They are now 54% larger than they usually are at this time of year.

But gas futures were adding to gains despite the glut, with investors betting they could make big gains from a market rebound, analysts said.

Supply appears to be falling from a record pace and consumption could be munch higher than usual this April, luring some bullish speculators into the market, analysts said.

Natural gas for May delivery recently gained 7.3 cents, or 3.8%, to $1.984 a million British thermal units on the New York Mercantile Exchange. It is the market's second-best daily percentage performance of the past two months.

Weather forecasts show colder-than-normal weather settling in to major Midwest and East Coast heating markets through mid-April. That late-season heating demand could make April's storage additions some of the lightest ever, said Teri Viswanath, managing director at consulting firm PIRA Energy Group in New York.

"Based on the weather forecasts, we're going to significantly reduce the surplus to the five-year average in April," said Kyle Cooper, managing director at Criterion Research LLC, a Houston consulting firm. "It seems like that's the primary driver right now."

Wednesday's output was also the lowest of the year and Thursday's output is likely to be about the same, according to analytics firm Platts Bentek. Now, at 71 billion cubic feet a day, output is down 2.7% from the record high hit in February.

Many investors have been speculating that natural-gas producers will start massive supply cuts soon because of a recent collapse in prices that took it to its lowest inflation-adjusted level in its history of trading on the New York Mercantile Exchange. Energy Aspects has said the recent pullback could be the first sign that trend is starting.

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