DJ Natural Gas Bounce Falls Flat on Soft Demand Outlook
By Timothy Puko
Natural gas is giving back early gains Tuesday morning and threatening to set a new two-year low as a soft demand
outlook continues to encourage traders to sell.
Natural gas for January delivery is down 1 cent, or 0.3%, at $3.134 a million British thermal units on the New
York Mercantile Exchange. It is the fourth-straight session of losses, a losing streak that has cut the front-month
contract by 16%.
Prices started higher Tuesday, but brokers said that was likely just a bit of temporary short covering, where
traders who sold contracts to bet on lower prices bought back in to cash out those winning bets. The larger trend is
still bearish, with record supply likely to overwhelm tepid demand, they said.
About half of all U.S. homes use natural gas for home heating, making it the primary driver for demand. But
temperatures could hit 60 degrees Fahrenheit on Christmas in New York, Philadelphia and Boston, some of the biggest
markets for heating demand, according to MDA Information Systems LLC.
"You're not burning the gas," said Frank Clements, co-owner of Meridian Energy Brokers Inc. outside New York. "I
fully expect us to go lower. There's just too much pressure on the market."
Forecasts do turn colder-than-normal for most of the country by next week, but the most severe cold isn't likely
to hit the biggest markets for heating. Production is so strong that traders and analysts believe it would take severe
cold in those markets to absorb the record supply.
"People were expecting cold temperatures for the Christmas week, it didn't materialize and funds just bail on
this," said Santiago Diaz, a broker at INTL FCStone Latin America in Miami. "Unless that (severe cold) materializes
this thing could go lower and die."
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.91/mmBtu, compared with
Monday's range of $2.95-$3.18. Cash prices at the Transco Z6 hub in New York last traded at $1.75/mmBtu, compared with
Monday's range of $2.85 to $3.06.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
December 23, 2014 09:57 ET (14:57 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
122314 14:57 -- GMT
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