WSJ: U.S. GAS: Futures Hit New 2012 High on Inventory Data
--Inventory rise of 72 bcf smaller than expected, below normal
--Year-on-year supply overhang drops to 6.8%; was 57% at end March
--Front-month gas hits highest levels since Dec. 2
By David Bird
NEW YORK--Natural-gas futures prices jumped more than 4% to a 2012 intraday high above $3.6 per million British thermal units after U.S. data showed gas storage levels rose by less than expected last week.
The Energy Information Administration said inventories rose by 72 billion cubic feet, below analysts' forecasts for a 79-bcf rise and below normal for the week. Last year, stocks rose by 108 bcf, while the five-year average increase was 84 bcf.
Even with the smaller increase, stocks are at a record high for this time of year at 3.725 trillion cubic feet.
But the market is focused on the continued shrinkage of the hefty year-on-year supply overhang. Stocks are now 6.8% above a year earlier. That's a huge drop from the end of March, when, after the warmest winter on record, the year-on-year overhang was nearly 57%.
The EIA said in a forecast Wednesday that stocks are expected to stand at an end-October record of 3.903 tfc. That would put the overhang at just 2.6%.
Market bulls, who have sent prices higher in 10 of the prior 12 sessions, are counting on winter temperatures returning to normal and boosting gas demand and prices.
Front-month November gas was up 4 cents ahead of the 10:30 a.m. EDT data release and quickly surged further. Prices hit an intraday high of $3.628/mmBtu, up 15.3 cents from Wednesday's settlement, and the highest level since Dec. 2, 2011.
Still, that 4.4% increase is less than the 4.8%, or 16c/mmBtu, gain on Oct. 1, when prices hit fresh 2012 highs for the first of three times this month..
November gas recently traded 12.2c higher, at $3.597/mmBtu.
"We'll need to see some cold weather now to see prices get propelled higher," said Matt Smith, analyst at Summit Energy. He noted that in the recent buying rush, the market seemed to rally through what were somewhat bearish short-term weather outlooks, suggesting it may have gotten ahead of itself. "If the market doesn't sell off on bearish weather outlooks, you've got to take some heed of that," he said.
