DJ Natural Gas Closes at One-Month Low on Soft Demand Outlook
By Timothy Puko
NEW YORK--Natural gas closed at a one-month low with mild weather and a soft demand outlook pushing down prices for a
second straight day.
The front-month November contract settled down 1.6 cents, or 0.4%, to $3.80 a million British thermal units on the
New York Mercantile Exchange. It was the first day in three weeks that the intraday price dropped below $3.80/mmBtu and
the lowest closing price for natural gas since Sept. 5.
Prices had fallen three times as far in the morning--as low as $3.764/mmBtu--but bounced back several times,
including a rally just before the trading floor closed. Traders simply don't want to go too far down on gas with winter
weather and a sharp rise in heating demand likely only a few weeks away, said John Woods, president of JJ Woods
Associates and a Nymex floor trader.
"You've got November right around the corner," he said. "If you're going to put it out on the line, you have to have
a pretty good handle on a long-range forecast because that could snap back around and hit you in the face."
Prices have largely stayed between $3.80/mmBtu and $4/mmBtu since mid-July. Record supply keeps pushing prices down,
but the push for a winter-weather risk premium keeps prices bouncing back when they hit the low end of that range.
Warm weather forecasts have pushed losses in the last two days as they make for a grim demand outlook. Temperatures
as much as 15 degrees Fahrenheit above normal will cover large parts of the country, especially the Rockies, through
the end of the month, according to MDA Weather Services. Without any cold to push demand for home heating, prices
shouldn't push past $4/mmBtu, according to energy-consulting firm Gelber & Associates in Houston.
"Mild weather that isn't going to generate any seasonal demand has the market under pressure again," said Gene
McGillian, a broker and analyst at Tradition Energy. "I'm a little surprised we haven't dropped down to our summer lows
yet, but I think it's coming."
The lowest closing price of the year came July 28, at $3.747/mmBtu.
Mr. Woods did agree that prices could possibly go lower if storage levels show a strong refill. The U.S. Energy
Information Administration is scheduled to give its weekly storage update Thursday at 10:30 a.m. EDT.
Analysts, traders and brokers expect the report to show a 90 billion-cubic-feet addition for the week that ended Oct.
10, according to The Wall Street Journal's weekly survey. That would be 15% larger than the average addition for that
time of year. It would be the eighth-highest addition ever for a week in October, according to EIA records that date
back through 1994.
Write to Timothy Puko at tim.puko@wsj.commailto:tim.puko@wsj.com
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(END) Dow Jones Newswires
October 15, 2014 15:16 ET (19:16 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
101514 19:16 -- GMT
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