Bitter Cold Fails to Boost U.S. Gas as Stockpile Glut Widens

  • Inventory surplus to five-year average is biggest since 2012
  • Mild weather seen for eastern U.S. after weekend cold snap

As the U.S. natural gas stockpile glut expands, bullish traders need more than a weekend of bitter cold to sustain a rally.

Gas futures slid below $2 per million British thermal units after a government report showed a smaller-than-forecast drop in inventories in the seven days ended Feb. 5. The withdrawal was less than half of the five-year average decline for the week.

The glut to the five-year average is the biggest in four years amid abundant supplies from shale formations. Winter heating demand hasn’t been enough to erode the surplus, which threatens to keep prices depressed into the second half of 2016.

“We have a lot of supply, and after the next few days, the short-term weather forecasts are not encouraging at all for the bulls,” said Dominick Chirichella, a senior partner at the Energy Management Institute in New York. “We’re going to be trading below $2 into the spring.”

Natural gas for March delivery fell 5.2 cents, or 2.5 percent, to settle at $1.994 per million British thermal units on the New York Mercantile Exchange. Prices are down 15 percent this year.

Gas inventories dropped by 70 billion cubic feet last week, compared with the five-year average withdrawal of 168 billion for the period, Energy Information Administration data released Thursday show. Analyst estimates compiled by Bloomberg had forecast a decline of 77 billion. Supplies were 23.4 percent above the norm in the seven days ended Feb. 5, the biggest surplus since June 2012.

Beyond this weekend, there’s little in the weather forecasts to boost gas prices. Temperatures may be mostly average or above normal in the lower 48 states after extreme cold in the eastern U.S. on Feb. 13 and 14, according to Commodity Weather Group LLC.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE