DJ Natural Gas Rises on Expectations of Strong Demand, Weaker Supply
By Timothy Puko
Natural gas rose Wednesday to its highest point in nearly five months as summer weather continues to strengthen
expectations for demand.
Natural gas for July delivery jumped 4.1% to $2.3810 a million British thermal units on the New York Mercantile
Exchange. Front-month prices are now up more than 21% since the June contract expired Thursday at just $1.963/mmBtu.
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. Weather updates for mid-June have been getting gradually
warmer, especially in the Southeast and Texas, areas that are likely to have temperatures as much as
five-degrees-Fahrenheit above normal from June 11 to 15, according to MDA Weather Services in Maryland.
Some traders are reacting to lower production numbers. Pipeline data suggest that output in the continental 48
states dropped to 72.1 billion cubic feet today, 2.2% lower than Tuesday and 2% lower from 30 days ago, according to
PointLogic Energy. However, analysts at PointLogic warned that pipeline flows often drop at the very beginning of the
month, and Wednesday's production estimates are likely to be revised higher by Thursday.
"Rising power plant demand and stalling production should rein on the supply glut going forward," Norbert Ruecker,
head of commodities research at Julius Baer, said in a note.
Government data released Thursday had shown a glut leftover from winter had storage levels at 2.8 trillion cubic
feet, 37% above levels from a year earlier and the five-year average for the same week. But that surplus to last year
could be just about eliminated by Nov. 1, analysts at Guggenheim said in a note. They forecast record gas consumption
from power plants for a slate of factors including lower coal stockpiles, weak wind power generation and declining
hydroelectric output.
"We believe the best stretch for natural gas is ahead in the second half of summer," Guggenheim analysts said.
Write to Timothy Puko at tim.puko@wsj.com
(END) Dow Jones Newswires
June 01, 2016 15:11 ET (19:11 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
060116 19:11 -- GMT
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