Dow Jones - End of Day Commentary

DJ Natural Gas Sinks on Warm February Forecast


   By Timothy Puko and Nicole Friedman


  Natural gas prices dropped to a two-month low Tuesday after weather forecasters removed almost all signs of frigid
weather from the late-February forecast, a bad sign for heating-fuel demand.

  Futures for March delivery settled down 6.3 cents, or 3.2%, at $1.903 a million British thermal units on the New York
Mercantile Exchange, the lowest settlement since Dec. 22. Gas has fallen for five straight sessions and lost 11% during
that period.

  Weather reports are showing normal to far-above normal temperatures blanketing most of the country through March 1.
About half of U.S. households use natural gas as their primary heating fuel, so a lack of winter cold often can drag
prices lower.

  "Prices are falling again today in response to further blowtorch weather forecasts for most of the remainder of
February and the beginning of March," said energy-advisory firm Gelber & Associates in a note.

  The problem is worse this year because stockpiles are so high, analysts said. Prices already plummeted to an
inflation-adjusted low in the history of Nymex trading late last year because of the combination of record-high
production and tepid heating demand tied to unseasonably warm weather.

  Many are predicting that without an extreme spell of cold and high heating demand, stockpiles will finish the winter
at or near record levels, possibly causing a glut to linger deep into 2016. The latest forecasts would raise those
expectations.

  The U.S. Energy Information Administration said Thursday that a far-below-normal drain on stockpiles last week left
them 25% above levels from a year ago and 23% above the five-year average for the same week.

  "The outlook remains very bearish," the London-based research house Energy Aspects said in a note about the market
titled "Squeezed." The firm called for weak prices through at least June and kept its forecast for an average price of
$2.35/mmBtu for the year.

  Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $1.915/mmBtu, compared with a range
of $1.99-$2.075 on Friday. Cash prices at the Transco Z6 hub in New York traded in a bid-ask range of $1.93/mmBtu to
$2.08/mmBtu, compared with Friday's range of $7.05-$8.00.
   FUTURES           SETTLEMENT      NET CHANGE
   Nymex March         $1.903          -6.3c
   Nymex April         $1.969          -6.1c
   Nymex May           $2.035          -6.0c
   CASH HUB                  RANGE             PREVIOUS SESSION
   El Paso Perm           $1.62-$1.70           $1.705-$1.755
   El Paso SJ             $1.63-$1.67           $1.73-$1.75
   Henry Hub              $1.88-$1.925          $1.99-$2.075
   Katy                   $1.78-$1.85           $1.92-$1.97
   SoCal                  $1.67-$1.75           $1.80-$1.85
   Tex East M3            $1.55-$1.62           $4.15-$5.50
   Transco 65             $1.8325-$1.89         $1.99-$2.035
   Transco Z6             $1.88-$2.00           $7.05-$8.00
   Waha                   $1.71-$1.75           $1.81-$1.84


  Write to Timothy Puko at tim.puko@wsj.com and Nicole Friedman at nicole.friedman@wsj.com


  (END) Dow Jones Newswires

  February 16, 2016 15:25 ET (20:25 GMT)

  Copyright (c) 2016 Dow Jones & Company, Inc.

021616 20:25 -- GMT
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