DJ Natural Gas Extends Rebound
By Nicole Friedman
NEW YORK--Natural-gas prices rose Monday on expectations that a decline in drilling will lead to lower production.
Natural gas futures for April delivery recently rose 5.8 cents, or 3.5%, to $1.724 a million British thermal units on
the New York Mercantile Exchange.
Prices plunged to 17-year lows last week as the surplus of natural gas grew due to robust production and sluggish
demand. Temperatures have been warmer-than-normal across much of the U.S., limiting the use of natural gas as an
indoor-heating fuel.
But low prices in recent months have also spurred companies to cut back on drilling more than previously expected,
Jefferies said in a note. The bank expects U.S. natural-gas supply at the end of this year to be 6% lower than last
year, more than its previous expectation for a 3.8% year-on-year drop.
The number of rigs drilling for natural gas in the U.S. fell by five last week to 97, the lowest level on record in
data going back to July 1987, according to oilfield services company Baker Hughes Inc.
However, analysts warn that the glut of natural gas is likely to cap price gains. As of Feb. 26, natural gas
stockpiles stood 36% above the five-year average level for this time of year.
"The market is on a trajectory to set a new all-time record for the amount of gas in storage at the end of March,"
said Andrew Weissman, chief executive of EBWAnalyticsGroup, in a note. "Demand in April is also likely to be far below
normal. The market may not start to recover until May--or even early June."
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $1.53/mmBtu, compared with Friday's
range of $1.46-$1.52. Cash prices at the Transco Z6 hub in New York last traded at $1.15/mmBtu, compared with Friday's
range of $1.18-$1.45.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
March 07, 2016 11:13 ET (16:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
030716 16:13 -- GMT
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