Dow Jones - End of Day Natural Gas Commentary - Market Falls To An 11-Month Low

DJ Natural Gas Closes at 11-Month Low on Soft Demand


   By Timothy Puko


  NEW YORK--Natural-gas prices hit their lowest close in nearly a year as warm October weather suggests heating demand
won't pick up soon.

  The front-month November contract settled down 9.6 cents, or 2.6%, to $3.67 a million British thermal units on the
New York Mercantile Exchange. That is the lowest closing price for the front-month contract since Nov. 19 when it
closed at $3.556/mmBtu. A five-session losing streak put gas below $3.70/mmBtu for the first time since Nov. 22.

  Weather forecasts, already warm for October, grew even warmer over the weekend. Weather is one of the most important
variables for natural gas prices because the fuel heats half of U.S. homes. The new forecasts suggest this October will
be the third warmest in 15 years: comfortable weather with little demand for gas heating, according to Commodity
Weather Group LLC in Bethesda, Md.

  "We're seeing a massive demand contrast to last year. Huge demand losses year on year," company president Matt Rogers
said. "I think that's what's getting the market today."

  Options traders have started putting a slew of new bets that the price will fall to between $3.50/mmBtu and
$3.70/mmBtu, Frank Clements, co-owner of Meridian Energy Brokers Inc. outside New York, said in a note. He had been
encouraging clients to buy as gas prices fell, but Monday he warned clients to be careful as those options traders
could push prices lower.

  "The market is teetering on turning completely bearish," he said.

  Without immediate demand, producers are going to get an extended season for stockpile additions, reducing an already
dwindling risk for any shortages in the winter to come, Teri Viswanath, natural-gas strategist at BNP Paribas SA in New
York, said in a note. That will leave futures anchored below $4/mmBtu until heating demand grows large enough to start
taking withdrawals from storage, she added. Analysts have estimated that may not happen until mid-November, a couple
weeks later than usual.

  But there are some who still believe this is the time to buy. It's worth considering locking in these lows prices
even with the risk that prices will go lower in the coming weeks, Aaron Calder, senior market analyst at
energy-consulting firm Gelber & Associates in Houston said in a note. Winter heating demand will arrive at some point
and it's better for buyers to jump in now rather than miss the turnaround, he said.

  "This is the tail end," said John Woods, president of JJ Woods Associates and a Nymex floor trader. "If you're a
buyer, you're just going to wait a little bit longer and then buy it."
   FUTURES SETTLEMENT      NET         CHANGE
    Nymex November        $3.67        -9.6c
    Nymex December        $3.765       -9.8c
    Nymex January         $3.851       - 10c
    CASH HUB                RANGE                   PREVIOUS DAY
    El Paso Perm         $3.50- $3.56                $3.49- $3.56
    El Paso SJ           $3.515-$3.56                $3.50- $3.56
    Henry Hub            $3.65- $3.71                $3.68- $3.74
    Katy                 $3.60- $3.64                $3.57- $3.665
    SoCal                $3.65- $3.80                $3.66- $3.715
    Tex East M3          $2.10- $2.42                $1.66- $2.10
    Transco 65           $3.60- $3.64                $3.645-$3.695
    Transco Z6           $2.25- $2.43                $1.67- $2.06
    Waha                 $3.52- $3.55                $3.53- $3.57

  Write to Timothy Puko at tim.puko@wsj.com


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  (END) Dow Jones Newswires

  October 20, 2014 15:32 ET (19:32 GMT)

  Copyright (c) 2014 Dow Jones & Company, Inc.

102014 19:32 -- GMT
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