DJ Natural Gas Selloff Halts as Traders Wait to See if Demand Rises
By Timothy Puko
Natural gas closed higher for a second-straight session with traders hesitant to keep selling so close to the peak
season for demand, analysts said.
The front-month January contract settled up 5.4 cents, or 1.5%, at $3.706 a million British thermal units on the New
York Mercantile Exchange. Prices have bounced up 3% since they closed near their low for 2014 on Monday.
Record production and mild December forecasts caused a near bear market in the last three weeks as traders have
expected supply to overwhelm demand for home heating. But hitting a yearly low in December is rare and prices are so
low they could start to draw more buyers from the power sector, analysts and brokers said.
"I think the market's searching for a bottom," said Frank Clements, co-owner of Meridian Energy Brokers Inc. outside
New York.
Many who sold loaned contracts, betting that prices would decline, are using this chance to buy back in and close out
those profitable bets, analysts said. Unseasonably warm forecasts for December are also starting to moderate, and cold
weather and high heating demand could send prices back up to $4/mmBtu in the first three months of 2015, analyst Jim
Ritterbusch said in a note to clients.
Analysts and brokers estimate that 45 billion cubic feet drained from natural gas stockpiles last week, according to
the consensus average of 15 forecasts in The Wall Street Journal survey. The U.S. Energy Information Administration
will give its weekly update at 10:30 a.m. Thursday.
That drain would be about half of the drain from the same week a year ago. A long-lingering stockpile deficit would
narrow to 5.1% compared to storage levels at this time last year and 9.3% compared to the five-year average level.
That deficit is still enough to give sellers pause, said Aaron Calder, senior market analyst at energy-consulting
firm Gelber & Associates in Houston. At these prices, more power generators could take advantage of the discount and
switch from coal to natural gas, supporting gas prices, he said in a note to clients.
"Inventories are already lower than normal so the market is nervous about bringing prices to a level that would
inspire large scale fuel switching," Mr. Calder wrote. "The next couple (stockpile) withdrawals will show the effect of
lower natural gas prices on demand. But until that happens, the market is in a holding pattern."
FUTURES SETTLEMENT NET CHANGE
Nymex January $3.706 +5.4c
Nymex February $3.736 +5.5c
Nymex March $3.695 +5.5c
CASH HUB RANGE PREVIOUS SESSION
El Paso Perm $3.40-$3.45 $3.39-$3.46
El Paso SJ $3.42-$3.46 $3.42-$3.47
Henry Hub $3.57-$3.65 $3.56-$3.67
Katy $3.44-$3.53 $3.46-$3.55
SoCal $3.62-$3.74 $3.57-$3.67
Tex East M3 $3.50-$3.61 $3.245-$3.65
Transco 65 $3.60-$3.65 $3.61-$3.64
Transco Z6 $4.40-$4.52 $3.97-$4.12
Waha $3.40-$3.445 $3.42-$3.45
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
December 10, 2014 15:27 ET (20:27 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
121014 20:27 -- GMT
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