Natural gas prices dipped, but then rebounded into gains for the day after
federal data showed last week produced the second-highest weekly surplus on
record.
Analysts and a trader said the market may have bounced from hitting its
one-month intraday low of $2.557 a million British thermal units. The
front-month July contract recently rebounded all the way to gains of 1 cent, or
0.4%, at $2.644/mmBtu on the New York Mercantile Exchange.
The market has been overwhelmed by bearish traders for months, and the
crowded trade itself has sparked some brief rallies. When a bearish trade gets
crowded, waves of traders often close out at once all trying to protect
themselves against a reversal at seemingly marginal signs of a rebound. That
doesn’t mean the market is fundamentally different, analysts and a trader said.
“We’re just respecting an old low,” said Dean Hazelcorn, trader at the
brokerage Coquest Inc. in Dallas. “People are not reloading their guns to get
long.”
Data released Thursday suggests the market is oversupplied by about 3 bcf a
day last week, according to analysts’ estimates. The U.S. Energy Information
Administration said storage levels grew by 132 billion cubic feet in the week
ended May 15. That is more than 40% larger than the 92-bcf five-year average
addition for the week and also more than the 123-bcf median average from
forecasters surveyed by The Wall Street Journal.
The EIA update is widely considered one of the best measures of supply and
demand for the natural-gas market. Gas prices have been too high to convince
power plants to use more of it and absorb near-record supplies, and Memorial
Day also probably cut demand by keeping businesses and schools closed, analysts
said.
“The market was ready for a large injection, but it’s still extremely
bearish,” said Kent Bayazitoglu, analyst at Gelber & Associates. “We’re not
going to see (a) strong rebound.”
Last week’s addition brought storage levels to 2.2 trillion cubic feet, 51%
more than a year ago and 1% above the five-year average.