Natural gas futures declined on a stockpile decline that was less than expected. The decline, according to the Energy Information Administration, fell 287 billion cubic feet in the week ending in January 10. This was the largest decline since 1994, but traders pulled back from the daily highs after it was less than the sought after 296 billion cubic feet forecast.
The traders knew it would be a large decline given the recent weather in the United States. “Obviously the market was expecting a large draw,” notes David Bouckhout, senior commodity strategist at Toronto-Dominion Bank. Also, a little profit taking is likely as natural gas seen a 28 percent increase in 2013, the largest gain of 24 commodities tacked by the Standard & Poor’s GSCI index.
Stockpiles have been rapidly declining as above-average temperatures blanket the US due to the “winter vortex” cold-front that pushed out from the arctic. There is colder weather expected to hit most of the US next week, but it is unlikely that the draw down will be significantly higher than current levels. This week’s inventory data only showed an additional two billion cubic feet in demand over the previous week. “We should see next week’s storage injection significantly below the number we see today,” said Tom Saal, senior VP of energy trading of FCStone Latin America LLC.