Dow Jones - Natural Gas Prices Rise On Expected Summer Demand

DJ Natural Gas Prices Rise on Expected Summer Demand

By Timothy Puko

     Natural gas rose to a 10-month high Tuesday as warm weather forecasts kept stoking expectations for strong demand
this summer.

     Prices are adding on to a surge that brought a new nine-month high the previous day, firmly putting gas on path to
a fourth-straight week of gains before the week is half over. Front-month prices have gained 41% since the June
contract expired at just $1.963/mmBtu on May 26.

     Natural gas for July delivery settled up 2.1 cents, or 0.7%, at $2.768 a million British thermal units on the New
York Mercantile Exchange. Gains in five of the past seven sessions have pushed gas to its highest settlement since Aug.
14.

     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.

     "In general, (traders) no longer believe that the market is oversupplied, " Kent Bayazitoglu, analyst at the
energy-consulting firm Gelber & Associates in Houston, said in a note.

     Weather forecasts have been showing above-average heat across the country for weeks to come and changed little on
Tuesday. Commodity Weather Group, however, did show temperatures as much as 15-degrees-Fahrenheit-above normal
spreading into the southeast through the rest of this week, and that area is one of the biggest drivers for
power-sector gas demand in the summer, analysts have said.

     Stockpiles -- at 3 trillion cubic feet -- are growing toward a record high for the end of the summer. But the
heat-related demand and lower production have weekly surpluses below where they usually are, causing the total storage
surplus compared with past years to shrink each week and probably for weeks to come, adding further support for prices
to rise, analysts said.

     "While I do think it's overbought, you can point to multiple reasons this thing has come to life here," said Bob
Yawger, director of the futures division at Mizuho Securities USA Inc. "You should expect a pullback in the coming
days, but I don't think you can except a very deep pullback."

     Write to Timothy Puko at tim.puko@wsj.com


  (END) Dow Jones Newswires

  June 21, 2016 15:30 ET (19:30 GMT)

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

062116 19:30 -- GMT
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