Thursday, April 3, 2014

Natural Gas: As Withdrawal From Storage Matches Estimates Citi Says Prices Don't Reflect Risks

FromMarketWatch:
Natural-gas futures on Thursday pared gains after the U.S. Energy Information Administration reported that supplies of natural gas fell 74 billion cubic feet for the week ended March 28. The decline came in on the low end of market expectations as analysts surveyed by Platts forecast a fall of between 73 billion cubic feet and 77 billion cubic feet. Total stocks now stand at 822 billion cubic feet, down 878 billion cubic feet from a year ago and 992 billion cubic feet below the five-year average, the government said. May natural gas NGK14 +1.79% was at $4.38 per million British thermal units, up 2 cents, or 0.3%. It was trading at $4.40 before the data....MORE
And from their DJ confreres at MoneyBeat:
Natural-gas prices are too low and put the U.S. at risk of not having enough gas in storage next winter and even beyond, say Citigroup analysts in a note published today.

Supplies are at 11-year lows, after a tough winter fueled demand for gas-powered indoor heating and ate away at a majority of the nation’s stored gas.

Many analysts and traders argue that booming production levels, which are projected to hit another record high this year, will allow stockpiles to replenish.
Citigroup has argued against this theory for months. A group of Citigroup analysts, led by energy strategist Anthony Yuen, published a note Thursday stating that production growth is likely to be less vigorous than current prices reflect.
“The market seems to think future supply should be robust, summer could be mild and winter would unlikely be cold,” the analysts write.

Production will likely expand by 3 billion cubic feet per day compared to last year, the bank says, but that will leave inventories with just 3.45 trillion cubic feet of gas in storage by the end of October. In comparison, the five-year average for the final week of October is 3.848 tcf. Lower-than-expected production growth could even reduce supply levels through 2015, the bank says....MORE
The futures reaction to the EIA storage report was initially down but are now at $4.440 up 7.6 cents: