DJ Natural Gas Hits One-Month High as Cold Spell Approaches
By Timothy Puko
NEW YORK-Natural gas prices burst back above $4, approaching their largest one-day gains in nearly five months as a
rush of early winter cold has traders expecting rising demand for the fuel.
Cool Canadian air is likely to spill over everything east of the Rockies by week's end, creating the first jolt of
heating demand for what had been a tepid market, weather forecasters and analysts said.
Traders who had been looking for the start of winter heating season pounced as soon as off-hours trading began Sunday
evening. Natural gas has now rallied for five-straight sessions, putting at its highest price since Oct. 3.
Natural gas is a notoriously volatile market, heightened now because of pressure from record supply and winter
worries. An onslaught of gas from U.S. shale drilling has pushed the fuel's price low enough to make it competitive
with coal and has several bank analysts expecting a glut by the spring. But with winter only weeks away, many traders
are thinking of last winter's record cold and demand spikes that pushed prices above $6 a million British thermal
units.
Strong supply will help slow rising prices, but last week's low now appears to be the market's bottom, said John
Kilduff, founding partner of Again Capital in New York, which invests in energy commodities. Many traders and
forecasters, including the U.S. Energy Information Administration, had expected prices to start rising in November and
stay above $4/mmBtu as winter cold appears.
"This is precisely what the market has been setting up for, to jump all over any early-season cold," Mr. Kilduff
said. "This blast of cold weather caught everybody by surprise to a degree, in its severity."
Natural gas for December delivery recently traded up 14 cents, or 3.6%, at $4.013/mmBtu on the New York Mercantile
Exchange. It had traded as high as $4.065/mmBtu with gains greater than 4% on the day. Gas prices have risen more than
4% on only one other day since mid-June.
Temperatures at times may drop to nearly 10 degrees Fahrenheit below normal in some of the biggest consumer markets,
such as Chicago, Dallas, Houston, Washington and Cincinnati, forecasters said. The cool is likely to be in full force
by Saturday and linger for more than a week, they said.
But even that kind of cold will have a limited impact on consumers, said Gabe Harris, senior North America gas
analyst at consulting firm Wood MacKenzie. Unseasonably cool weather in early November just means comfortable weather
in southern markets like Dallas and Houston. They won't need air conditioning or heating, and that will cancel out any
demand spikes from northern consumers, Mr. Harris said.
"It's normal winter volatility, really," he said.
Investors in the last two weeks had just started to bet more on falling prices than on rising prices for the first
time in nearly a year. That helped create an exaggerated reaction as weather forecasts cooled, traders and analysts
said.
Buyers looking for a winter spike moved aggressively in part to force short-sellers - the traders who bet prices
would fall - to capitulate, said Scott Gettleman, an independent trader in New York. Short-sellers may have to buy back
in and close out their bets if a strong rise in prices puts them in a no-win position, and that gives people who bet on
rising prices a chance to cash in.
"Once (buyers) know they have the shorts, they try to run," Mr. Gettleman said. "If another (cold) weather report
comes out later this week, they're going to slam this market so hard."
Write to Timothy Puko at tim.puko@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwireshttp://online.wsj.com?mod=djnwires">http://online.wsj.com?mod=djnwires
>
(END) Dow Jones Newswires
November 03, 2014 13:28 ET (18:28 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
110314 18:28 -- GMT
------
No comments:
Post a Comment