DJ Natural Gas Extends Rallying As Cold Weather Spreads
By Timothy Puko
Natural gas prices are rising slightly from increasingly cold weather forecasts, but strong production has limited
gains, analysts said.
Natural gas for March delivery is up 0.3 cents, or 0.1%, at $2.80 a million British thermal units on the New York
Mercantile Exchange. Prices had hit a two-week intraday high in early morning trading, but the market has pared gains
since then, even dipping to losses.
Temperatures more than 15-degrees-Fahernheit-below normal are covering everywhere between Ohio and New Hampshire and
lingering through the weekend, according to MDA Weather Services in Maryland. Two shots of Arctic air and a
"high-impact" winter storm are headed for New England this weekend, according to Weather Services International in
Andover, Mass.
Half of U.S. homes use natural gas for heat, making winter cold a big driver for demand. And far-below-normal
temperatures are now expected to spread over two-thirds of the country by next week, countering initial forecasts that
said they would be contained to the east. Now meteorologists expect them to cover everything east of the Rockies for
most of the month, the forecasts said.
Analysts have recommended in recent weeks that bears use a weather-inspired rally as a chance to sell. The shale gas
boom has led to record production that has repeatedly overwhelmed demand, leading many traders and analysts to expect
prices will retreat back toward $2.50/mmBtu and maybe even lower.
Meteorologists "keep putting in a little more cold--grudgingly--every day. But we're in the second week of February,
so how much more of a winter can we have?" said Gene McGillian, an analyst at Tradition Energy. "Really significant
gains during these (production levels) are going to be hard to come by."
The U.S. Energy Information Administration on Tuesday raised its expectations for production, saying it will average
72.8 billion cubic feet in 2015. That is up 0.6% from what the agency forecast a month ago and up 3.7% from what the
industry produced in 2014. Producers are becoming more efficient, and they will be able to extract more gas at lower
costs, allowing production to rise even as commodity prices fall, the agency said.
The EIA is scheduled to give its weekly update on storage levels at 10:30 a.m. EST Thursday. Stockpiles likely fell
by 170 billion cubic feet of gas during the week ended Feb. 6, nearly on par with the 178-bcf average fall for this
time of year, according to the consensus forecast of 16 analysts and brokers surveyed by The Wall Street Journal.
The strong decline this week and in several recent weeks implies that the long-oversupplied market is roughly coming
into balance on a weather-adjusted basis, according to the energy investment bank Tudor, Pickering, Holt & Co.
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.865/mmBtu, compared with
Wednesday's range of $2.82-$2.875. Cash prices at the Transco Z6 in New York traded in a bid-ask range of $13.50/mmBtu
to $20.00/mmBtu, compared with Wednesday's estimate of a high or low of $15.00.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
February 12, 2015 09:41 ET (14:41 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
021215 14:41 -- GMT
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