DJ Natural-Gas Rally Inches on as Weather Forecasts Warm
By Timothy Puko
NEW YORK--Natural-gas prices inched up Monday, extending a weeklong rally as
weather updates show summer heat on the way.
Natural gas for September delivery is up 3.1 cents, or 0.8%, at $3.993 a
million British thermal units on the New York Mercantile Exchange. Prices
crested above $4/mmBtu for the first time in nearly a month in what would be
the fifth session of gains in the last six.
Though forecasts show a mix of above- and below-normal temperatures for parts
of the country, ultimately the forecast is bullish, according to Commodity
Weather Group. Heat causes people to turn on air conditioning and use more
gas-fired electricity, and the trend developing about a week out shows some of
strongest heat waves in what has been a mild season.
The strongest impact will be on the East Coast, where highs should push into
the low 90s, according to Commodity Weather Group. Some heat will linger for
prolonged periods across the Midwest, too, and with Texas and the south could
hit the 100-degree-Fahrenheit mark they have rarely reached so far this year,
according to Weather Services International in Andover, Mass.
"This is a weather rally right here and this is about all it's going to
give," said John Woods, president of JJ Woods Associates and a Nymex floor
trader.
Many analysts echoed those comments, saying rampant production is likely to
keep the rally in check. A supply surge from the domestic drilling boom had
already caused gas prices to drop by about 20% between June 12 and Aug. 4, when
the recent rally started. Money managers have nearly erased what had been a
record bullish bet on natural gas, taking their net-long position to a
nine-month low, CFTC data showed Friday.
But in the short term prices have stabilized for more than two weeks, with
recent gains likely coming from electric companies buying up gas after its
price fell, other analysts said. For 10 days spanning late July and early
August, power generators burned 27.5 billion cubic feet a day of gas, an
increase of 3.8% from the rest of July and of 4.7% from the same period a year
ago, according to Societe Generale SA.
The increased consumption--especially with prices still higher this August
than they were a year ago--suggests utilities are eager to buy and that a gas
price of $4.10/mmBtu is a threshold for power generators to decide between
burning coal or gas, Societe Generale analyst Breanne Dougherty said in a note
Thursday. That should sustain the gas market's gains toward $4.05 in the coming
weeks, she said.
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded
at $3.995/mmBtu, compared with Friday's range of $3.90-$3.94. Cash prices at
the Transco Z6 hub in New York traded in a bid-ask range of $2.68/mmBtu to
$2.90/mmBtu, compared with Friday's range of $2.42 to $2.48.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
August 11, 2014 09:38 ET (13:38 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
081114 13:38 -- GMT
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