Dow Jones - Natural Gas Falls As Weather Signals Soft Demand

DJ Natural Gas Falls as Weather Signals Soft Demand--Update


   By Timothy Puko


  Natural gas fell to its lowest settlement in nearly a month as temperate weather forecasts suggest soft demand on the
way.

  The front-month August contract settled down 4 cents, or 1.5%, to $2.716 a million British thermal units on the New
York Mercantile Exchange. A two-day losing streak has now pushed gas below the tight, 17-cent range it had settled
within every session since June 9.

  Weather forecasts are suggesting that the early part of the summer isn't going to be hot enough to drive the kind of
demand needed to soak up near-record production, analysts said. Hot weather can lead people to use air conditioning and
gas-fired power. But the Northeast and Midwest, some of the largest markets, are seeing normal to unseasonably cool
forecasts, said Paul Markert, senior meteorologist at MDA Weather Services in Maryland.

  "It's harder to believe that hot weather will bail out bullish traders," Aaron Calder, senior market analyst at
energy-consulting firm Gelber & Associates in Houston, said in a note.

  Power plants also burned less gas in recent days, possibly because of the slower holiday weekend, said John Saucer,
vice president of research and analysis at Mobius Risk Group in Houston.

  Cash prices at many points around the country are coming off of record lows from last week, but haven't surged above
futures prices. Pipeline bottlenecks are trapping an oversupply of gas in regional markets. Several hubs in the
northeast saw prices far below $2/mmBtu on Tuesday.

  "It's looking looser, sloppier, weaker than where we were a week ago," Mr. Saucer said.

  Production has been so strong this year--holding near record highs despite cutbacks that have led to a record-low
number of working gas drilling rigs--that Jefferies LLC cut its price outlook. The bank's analysts also cited
expectations for a disappointing amount of exports.

  They cut their 2015 forecast to $3.00/mmBtu from $3.50 and cut their 2016 forecast to $4 from $4.25. That is still
higher than long-term futures prices. The Jefferies analysts said they are ultimately still bullish because they expect
production growth will have to slow down while new pipelines get built and because demand for gas-fired power will
increase.

   FUTURES          SETTLEMENT   NET CHANGE
   Nymex August     $2.716       -4c
   Nymex September  $2.726       -4c
   Nymex October    $2.758     -3.9c
   CASH HUB          RANGE                   PREVIOUS SESSION
   El Paso Perm       $2.60- $2.6475          $2.59 - $2.69
   El Paso SJ         $2.59 - $2.64            $2.59 - $2.63
   Henry Hub         $2.68 - $2.765            $2.7225 - $2.75
   Katy               $2.685 - $2.725           $2.70 - $2.76
   SoCal              $2.74 - $2.86            $2.7975 -$2.95
   Tex East M3        $1.24 - $1.50           $1.35 - $1.545
   Transco 65         $2.70 - $2.715            $2.72 - $2.73
   Transco Z6          $2.35 - $2.91            $1.94 - $2.80
   Waha               $2.65 - $2.665            $2.64 - $2.67


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


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  (END) Dow Jones Newswires

  July 07, 2015 15:23 ET (19:23 GMT)

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

070715 19:23 -- GMT
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