Dow Jones - Natural Gas Soars In Second Quarter

DJ Natural Gas Soars in Second Quarter



  By Nicole Friedman


  NEW YORK--Natural gas posted its largest quarterly percentage gain since 2005 on expectations that falling production
and strong demand would shrink the glut of fuel.

  Prices rose 96.5 cents, or 49%, in the second quarter to $2.924 a million British thermal units on the New York
Mercantile Exchange.

  Prices rose Thursday after weekly inventory data showed that inventories grew less than expected last week. Futures
for August delivery settled up 0.61 cent, or 2.1%.

  Producers added 42 billion cubic feet of natural gas to storage in the week ended June 24, the Energy Information
Administration said Thursday, less than the 48-bcf injection that analysts surveyed by The Wall Street Journal had
expected.

  The natural-gas market remains oversupplied following a winter of sluggish demand, but the relative surplus of fuel
in storage has shrunk in recent weeks due to declining production and rising demand. Inventories as of June 24 totaled
3.14 trillion cubic feet, 23% above levels from a year ago and 25% above the five-year average for the same week.

  Prices have risen strongly in recent weeks on forecasts for hot weather, which can increase demand for gas-powered
electricity to run air-conditioning units.

  "With strong weather-induced power demand...the next two [storage injections] are likely to be very light," said
Jefferies in a note.

  However, prices might not be able to hold gains above $3/mmBtu, because that level could prompt some power plants to
switch from natural gas to coal, which is cheaper, and could encourage some producers to drill new wells, said Teri
Viswanath, managing director at PIRA Energy Group.

  "Despite the bullish sentiment, a premature arrival of the $3 handle poses a significant risk for reversing this
hard-won balancing achieved this season," she said.


  Write to Nicole Friedman at nicole.friedman@wsj.com


  (END) Dow Jones Newswires

  June 30, 2016 15:10 ET (19:10 GMT)

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

063016 19:10 -- GMT