DJ Natural Gas Prices Continue to Climb on Expected Summer Demand
By Timothy Puko and Nicole Friedman
Natural gas touched a new eight-month high and settled at its second highest price of the year Monday as warming
weather forecasts keep stoking expectations for rising demand.
Prices are up in eight of the last 11 sessions and traded near intraday highs dating back to September in each of
the last three sessions. Front-month prices have gained 32% since the June contract expired at just $1.963/mmBtu on May
26.
July's contract hasn't traded below $2/mmBtu since early March, and summer prices are often higher because of
increasing demand for gas-fired power to run air conditioners. That has spurred much of the rally, along with slight
declines in production and a record-low number of working rigs that has some traders expecting larger production
declines on the way.
Natural gas for July delivery settled up 2.9 cents, or 1.1%, at $2.585 a million British thermal units on the New
York Mercantile Exchange. It did retreat from gains of more than 6 cents/mmBtu earlier in the session after noon
weather updates cooled down forecasts for about two weeks away. Weather has become critical to the gas market again in
recent weeks as traders try to anticipate summer demand.
Updates from both MDA Weather Services and Commodity Weather Group LLC -- two widely watched private forecasters
-- showed unseasonably warm temperatures getting warmer and spreading further over the Southwest, Midwest and the
Southeast. Nearly the entire country will be awash in temperatures 3 to 15 degrees Fahrenheit above normal by the last
week of June, according to MDA.
"Some unusually hot and broad based temperature patterns ... have conjured up images of an exceptionally warm
summer," Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates said in a note.
A new report from S&P Global Platts is also bolstering the idea that oversupply is due to shrink as production
falls and weather-driven demand returns to normal.
Natural-gas output in the Northeast has surged in recent years even as producers have slashed spending and removed
drilling rigs. That is because new pipelines allowed them to bring previously drilled wells online and transport more
gas to buyers. But that backlog of drilled wells is shrinking, the report says, and will likely vanish by the end of
the year or early next year.
When that happens, production could fall by a billion cubic feet per day within a month, the firm says.
"Such a drop would likely prompt not only a price recovery ... but also a quick increase in drilling activity,"
according to the report.
Write to Timothy Puko at tim.puko@wsj.com and Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
June 13, 2016 15:33 ET (19:33 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
061316 19:33 -- GMT
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