06/04 10:33a CST DJ Natural Gas Rebounds Despite Data Showing Second-Largest Surplus on Record

June 4th, 2015

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



  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



  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



  “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.









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