Dow Jones - Natural Gas Prices Fall To 17-Year Low

DJ Natural Gas Prices Fall to 17-Year Low

By Nicole Friedman

     NEW YORK--The U.S. natural gas market faces another year of ultralow prices as winter comes to an end and the
start of liquefied natural gas exports has failed to boost prices.

     Natural gas prices plunged to their lowest level since the 1990s Monday as weather forecasts for the next two
weeks turned warmer.

     Winter typically marks the peak of natural gas demand as homes and offices turn up the heat. About half of U.S.
households use natural gas as their primary heating fuel.

     But the El Ni?o weather phenomenon has kept temperatures warmer than normal across much of the U.S. this
year, reducing natural-gas demand.

     Weather forecasts released Monday called for warmer weather in the next two weeks than previously expected,
squashing any expectations that a late-winter cold spell could help shrink the oversupply of natural gas.

     Natural gas futures for April delivery recently fell 6.5 cents, or 3.6%, to $1.726 a million British thermal units
on the New York Mercantile Exchange. Prices traded as low as $1.69/mmBtu earlier in the session, on track for the
lowest settlement since March 1999.

     Natural gas prices have slumped in recent years as a shale-drilling boom in the U.S. pushed production to record
levels.

     Output remains high, even as companies have sharply cut spending on new drilling due to plummeting oil prices.

     "Each passing week increasingly feels like a stroll up the down escalator," said Shikha Chaturvedi, analyst at
J.P. Morgan, in a note. "Rising production [and mild weather] will pressure and extend the ongoing pricing malaise."

     Analysts expect prices to remain subdued this year due to the massive glut of natural gas sitting in storage.
Natural-gas inventories stood at 2.584 trillion cubic feet as of Feb. 19, 29% above the five-year average for this time
of year, according to the Energy Information Administration.

     Natural-gas stockpiles typically shrink during the winter when consumption is strong, then grow between April and
October as producers prepare for the next winter. That leaves only a few weeks left this season for storage
withdrawals.

     "Even allowing for an unusually hot summer that could slow supply injections, it appears that spot prices will
need to be maintained at sub $2 levels in order to preclude storage overcrowding next fall," said energy-advisory firm
Ritterbusch & Associates in a note.

     Analysts have long expected the start of U.S. LNG exports to lift the market, as the domestic glut would be
absorbed by overseas demand, especially in Asia. But the international natural-gas market is also oversupplied, pushing
down LNG prices and reducing the demand for U.S. fuel. The first U.S. LNG tanker for export left the country last week,
but domestic prices have remained subdued.

     Write to Nicole Friedman at nicole.friedman@wsj.com


  (END) Dow Jones Newswires

  February 29, 2016 10:58 ET (15:58 GMT)

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

022916 15:58 -- GMT
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