DJ Natural Gas Rises on Warming Weather Forecasts and New Contract
By Timothy Puko
NEW YORK--Natural-gas prices climbed above the $4 mark Thursday as momentum builds around a late burst of summer heat
and the switch to a new front-month contract.
Natural gas for October delivery is up 3.5 cents, or 0.9%, at $4.038 a million British thermal units on the New York
Mercantile Exchange. It is the highest front-month price in six weeks and the first time gas has broken out of a
30-cent trading range during that time.
A lot of the gains come from switching to October as the front-month contract. It has peaked above $4/mmBtu in the
two prior sessions while September didn't, expiring Wednesday at $3.957.
The front-month contract has been gaining momentum for two weeks, largely from late-arriving heat in what had been a
mild summer. Summer heat makes it more likely people will use air conditioners, consuming more gas-fired electricity.
Gas is now up nearly 7% since Aug. 18. Moderately above-normal temperatures are likely to spread across the Midwest,
East and South through the first week of September, according to Commodity Weather Group LLC in Bethesda, Md., which
added higher temperatures to its six-to-10 day forecast overnight.
"We've had enough bullish news" to keep pushing up the price just as the contract switched, said Breanne Dougherty,
Societe Generale SA analyst. "Once (the gas market) starts getting a little bit of the taste of the bullishness, it's
going to take a little more of it until it's told to go bear."
Ms. Dougherty and others warned that the gradual uplift isn't likely to last. The peak summer-demand season is past,
and the heat isn't strong enough to spur substantial demand, analysts and meteorologists said. Real-time figures on gas
consumption at power plants hasn't shown a notable increase in the past week, Ms. Dougherty said.
Record production is also coming strong. The federal government's weekly report on natural gas stockpiles comes out
at 10:30 a.m. ET, and traders expect it to show a 77 billion-cubic-feet surplus, according to a Wall Street Journal
survey. That addition would be a third larger than the five-week average addition for that week of the year.
"Week-to-week summer weather changes should not distract from the much, much bigger question of who consumes all the
incremental gas production this year and next," analysts at the energy investment bank Tudor, Pickering, Holt & Co.
said in a note. "Our gas supply forecast keeps moving up with no corresponding demand change."
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $4.0375/mmBtu, compared with
Thursday's range of $3.965 to $4.00. Cash prices at the Transco Z6 hub in New York traded in a bid-ask range of
$2.08/mmBtu to $2.24/mmBtu, compared with Thursday's range of $2.72 to $2.83.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
August 28, 2014 09:50 ET (13:50 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
082814 13:50 -- GMT
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