DJ Natural Gas Extends Gains on Production Cut Outlook
By Christian Berthelsen
Natural gas futures extended gains Wednesday on market optimism that surging U.S. production is beginning to taper
off.
Natural gas futures were up 0.3% at $2.01 a million British thermal units on the New York Mercantile Exchange, adding
to a 4.8% rise on Tuesday. Prices are down more than 14% this year, thanks to robust supplies and a tepid winter that
chilled demand for gas-fired heating.
Soaring gas output from shale fields has helped create an oversupply in the market, with inventories more than 54%
higher than average for this time of year. But data from the U.S. Energy Department released this week indicates
production is beginning to taper off in response to low oil and gas prices, with expectations of a 1.1% decline in May
over April.
The rally on the production data is a departure from the usual drivers for the market, which is more often influenced
by weather outlooks for the coming weeks as a barometer of coming demand. Weather forecasts turned bearish for the
market Wednesday, with an expected prolonged chill turning toward more normal spring temperatures for much of the U.S.,
but the market looked past the revised outlook.
Demand is expected to retreat further in the coming weeks with warmer temperatures and the onset of so-called
shoulder season between winter and spring.
"This market has staged an impressive advance this week despite a seemingly bearish shift within the short-term
temperatures outlooks," research consultancy Ritterbusch and Associates said in a note. "The market appears to be
focused on some production slippage that is apparently being interpreted as sustainable."
Write to Christian Berthelsen at christian.berthelsen@wsj.com
(END) Dow Jones Newswires
April 13, 2016 10:18 ET (14:18 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
041316 14:18 -- GMT
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