DJ Natural Gas Rebounds on Cool Forecast, Expiring Contract
By Timothy Puko
Natural gas closed higher as a cooler afternoon weather update pushed the December contract on one last rally before
it expired.
The front-month contract settled up 13.1 cents, or 3.2%, at $4.282 a million British thermal units on the New York
Mercantile Exchange. December futures ended a volatile month on a volatile note. The contract moved by more than 2%, up
or down, in all but three of its last 21 sessions.
Most trading volume has moved to the January contract. It also settled higher, up 9.9 cents, or 2.3%, at
$4.403/mmBtu.
The rally picked up in the afternoon as weather updates showed cooler temperatures than previous forecasts. Half of
U.S. homes use natural gas for heating, and the market had spent the morning in retreat as traders expected demand to
start falling from unseasonably warm weather.
"The model message is while it's warmer (outside of the West), it's really just relative to how cold November was,"
WeatherBELL Analytics LLC said in its afternoon update.
This month has been on pace to be one of the coldest Novembers with some of the highest demand for gas heating in
recent history, according to analysts. That had boosted the market earlier this month and helped end a two-session skid
when analysts on Tuesday made lofty projections for this week's gas stockpile update.
They expect the U.S. Energy Information Agency to report tomorrow that high demand from last week's cold drained
stockpiles by 149 billion cubic feet. That would be a 25-fold increase on the week's five-year average drain and it
would be the second-largest drain for a week in November in EIA records that date back through 1994.
That encouraged traders to bid up the market Tuesday, said Gene McGillian, an analyst at Tradition Energy. The EIA is
scheduled to release its storage data for the week on Wednesday at noon EST. It is making an advance release because of
the Thanksgiving holiday.
The contract expiration encouraged buyers to step in, said Michael Doyle, a broker at Eclipse International Inc. in
New York. Many investors had bet against prices earlier this month, expecting strong supply would cause prices to fall.
For those short-sellers holding December contracts, this was their last chance to buy back in to close out those bets,
Mr. Doyle said.
Warmer weather on the way could still make those expectations for falling prices come through very soon, Mr.
McGillian said. But the weather has been so volatile, and so many traders are adamant about cold weather and high
demand, that it's created an uncertain market despite reliable supply, Mr. Doyle said.
"I've got a guy shouting 'Vortex! Vortex! Vortex!' He loves throwing that around," Mr. Doyle said, referring to last
year's "polar vortex" weather phenomenon that caused record cold and $6 natural-gas prices. "It could go anywhere from
here."
FUTURES SETTLEMENT NET CHANGE
Nymex December $4.282 13.1c
Nymex January $4.403 9.9c
Nymex February $4.377 9.6c
CASH HUB RANGE PREVIOUS DAY
El Paso Perm $4.03-$4.09 $4.10-$4.17
El Paso SJ $4.04-$4.09 $4.06-$4.17
Henry Hub $4.10-$4.165 $4.04-$4.13
Katy $4.03-$4.06 $4.05-$4.15
SoCal $4.19-$4.35 $4.25-$4.34
Tex East M3 $3.56-$3.90 $3.24-$3.65
Transco 65 $4.07-$4.14 $4.055-$4.0950
Transco Z6 $3.95-$4.45 $3.28-$3.45
Waha $4.03-$4.07 $3.97-$4.10
--Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
November 25, 2014 15:59 ET (20:59 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
112514 20:59 -- GMT
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