Natural Gas Falls From Five-Year High Before Inventory Report

Natural gas in New York fell from a five-year high before the release of a government report that may show an above-average supply drop.

Gas slid as much as 4.2 percent. Energy Information Administration data today may show inventories declined by 257 billion cubic feet last week, according to the median of 21 analyst estimates compiled by Bloomberg. The five-year average drop for the period is 133 billion. Futures rose 4.1 percent earlier, pushing the relative strength index to more than 70, which is seen as a possible sell signal.

“It’s still supportive of $6; I think it’s anxiety ahead of the storage number,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The market has rallied quite strongly. RSI is the most widely watched momentum indicator, and when it’s banging up against 70, it’s a flashing ‘be careful’ sign because you are in an overbought territory and it could quickly turn.”

Natural gas for March delivery fell 4.7 cents, or 0.8 percent, to $6.102 per million British thermal units at 9:42 a.m. on the New York Mercantile Exchange after rising to $6.40, the highest intraday price since Dec. 4, 2008. Trading was 43 percent above the 100-day average. Yesterday’s gain of 11 percent was the most since June 14, 2012. The RSI was 70.08 at 9:27 a.m.

Stockpiles Down

Prices are up 44 percent this year as waves of arctic air boosted demand for heating fuel, cutting gas stockpiles in early February to the lowest level for the time of year since 2004.

“Weather forecasts will cause price volatility through March but we expect end-March storage to come in at 1.1 trillion cubic feet, the lowest since 2004,” Adam Longson, a New York-based analyst for Morgan Stanley, said in an e-mailed report.

The market overestimates costs to refill stores and an average price of $4.35 per million Btu for the injection season “should be high enough to support adequate restocking by October,” Longson said. “Prices should trend lower through summer” and may fall below $4 in the third quarter.

If stocks fall below 1 trillion cubic feet, a summer price of $5.10 will allow for “adequate gas-to-coal switching to refill storage,” Credit Suisse analysts led by Ray Farris in Singapore said in a research note today.

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