Dow Jones Natural Gas - Prices Slide As Weather Forecast Warms Up

DJ Natural Gas Prices Slide as Weather Forecast Warms Up


   By Christian Berthelsen


  Natural gas futures slumped more than 2% Monday after new revisions to weather forecasts predicted a warm surge for
much of the country through the middle of January, slashing expectations for gas-fired heating demand.

  The front-month February natural gas contract was down 8.2 cents, or 2.7%, to $2.8640 a million British thermal units
on the New York Mercantile Exchange. Natural gas futures lost more than 30% over the last seven weeks due to soaring
production and tepid demand for most of the heating season so far.

  Heating demand isn't expected to see any kind of uptick in the near future, with forecasts calling for "a significant
January thaw over the entire U.S. kicking off this weekend and dominating next week," as Commodity Weather Group said
in a note. A huge swath of much-above normal temperatures is predicted to stretch from Montana to Maine and as far
south as Arkansas, lingering on the eastern seaboard late into the month.

  "People are watching for the second half of January to have milder weather," said Gene McGillian, senior analyst at
wholesale brokerage Tradition Energy.

  Despite a large drain on natural gas supplies last week, stockpiles have mostly recovered from the record withdrawals
resulting from last year's severe winter. The U.S. has nearly 3.1 trillion cubic feet of gas in storage, 8.8% above
year-ago levels and just 2% below average. Booming production from U.S. shale fields is responsible for most of the
recovery, though overall weak demand has also been a factor.

  Morgan Stanley said in a research note that it would take "extreme bullish weather" to bring prices back up to $4 a
million BTUs, but that it seemed unlikely. "U.S. storage has moved into a healthy surplus," the bank said.

  In the physical market, cash prices for next-day delivery at the benchmark Henry Hub in Louisiana last traded at
$2.90 a million BTUs, below Friday's range of $2.92-$3.025. Cash prices at the Transco Z6 hub in New York traded in a
bid-offer range of $5-$16.50 a million BTUs, compared with Friday's range of $10-$14.50.


  Write to Christian Berthelsen at christian.berthelsen@wsj.com


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  (END) Dow Jones Newswires

  January 12, 2015 09:41 ET (14:41 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

011215 14:41 -- GMT