Dow Jones - End of Day Natural Gas Commentary

DJ Natural Gas Closes Lower on Uncertainty Over Warming Forecast



  By Timothy Puko


  NEW YORK--Natural-gas prices closed lower Tuesday with traders unconvinced
that a warming forecast would translate into a significant increase in demand.

  The front-month September contract settled down 2.6 cents, or 0.7%, to $3.911
a million British thermal units on the New York Mercantile Exchange. The more
actively traded October contract settled down 3 cents, or 0.8%, to
$3.949/mmBtu. September options expired at close and the contract expires
Wednesday.

  Both contracts flip-flopped around unchanged on a lot of mixed signals,
primarily from the weather, analysts said. Though most forecasts showed another
spurt of summer heat coming in early September, that wasn't a unanimous
prediction. The warmer forecasts also included signs that cooler fronts could
break up or limit the heat likely to hit the south and east.

  "Without the forecast (for heat) being extended into the first three weeks of
September, we don't really have enough momentum...to get another leg on the
rally," said Gene McGillian, a broker and analyst at Tradition Energy.

  Production from the domestic gas boom is just too overwhelming, he added.
U.S. gas producers are on pace to hit a record 73.9 billion cubic feet a day
this year, according to the Energy Information Administration. That has left
the market out of balance, oversupplied by more than 3 bcf a day this summer,
according to Tudor, Pickering, Holt & Co., an energy investment bank in
Houston.

  Gas prices have bounced back at times from earlier summer losses, apparently
helped by power plants jumping in to buy at cheaper prices, analysts have said.
But the oversupply has put a ceiling on that, and gas prices have retreated as
they close in on $4/mmBtu.

  That was the primary force in play Tuesday, Mr. McGillian said. The contract
expirations also helped, with options traders and technical traders unwilling
to push the price over $4 with so little trading timing remaining on the
September contract, other analysts said.

  Tuesday's losses brought gas back toward the middle of the 29-cent range it
has traded within for more than a month. Without the influence of severe
weather, it is unlikely to break out of that range soon, Mr. McGillian and
other analysts said.

FUTURES         SETTLEMENT     NET CHANGE
 Nymex September $3.911         -2.6c
 Nymex October   $3.949         -3c
 Nymex November  $4.018         -3.1c

CASH HUB      RANGE          PREVIOUS DAY
 El Paso Perm $3.86-$3.915   $3.835-$3.865
 El Paso SJ   $3.91-$4.00    $3.86-$3.90
 Henry Hub    $3.915-$3.98   $3.89 -$4.00
 Katy         $3.955-$4.02   $3.96-$4.00
 SoCal        $4.10-$4.31    $4.05-$4.31
 Tex East M3  $2.70-$2.85    $2.45-$2.62
 Transco 65   $3.92-$3.975   $3.905-$3.9475
 Transco Z6   $2.85-$2.95    $2.50-$2.78
 Waha         $3.92-$3.95    $3.83-$3.925


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


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  (END) Dow Jones Newswires

  August 26, 2014 15:40 ET (19:40 GMT)

  Copyright (c) 2014 Dow Jones & Company, Inc.

082614 19:40 -- GMT
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