DJ Natural Gas At Two-Week Low on Warm Weather Forecasts
By Timothy Puko
NEW YORK--Natural gas closed at a two-week low Monday as warming weather forecasts and effects from the crude selloff
continue to rip through energy markets.
The front-month January contract settled down 8.1 cents, or 2%, at $4.007 a million British thermal units on the New
York Mercantile Exchange. It spent most of the trading session below $4/mmBtu, sinking to its lowest intraday point
since October and closing at its lowest settlement since Nov. 13.
Prices had peaked above just two sessions ago, but fears of a cold December have dissipated. Half of all U.S. homes
use gas for heating, making weather the big driver in the natural gas market. Weather forecasts had shown the type of
cold that could create an early start to winter heating season, but are now giving way to an unseasonably warm
December, damping expectations for demand and putting prices into retreat.
A polar front is moving out within the next week, weather forecasts say. Weather Services International in Andover,
Mass., said Monday that "the 6-10 day period may feature rather widespread above-average temperatures across the
nation."
That has traders refocused on the record amount of supply coming from the shale gas boom, analysts said.
"Even normal temperatures would be bearish, so these extremes would be a lot more bearish than normal," said Aaron
Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston.
The updated forecasts led to the gas market immediately opening nearly 3% lower Sunday evening. Prices stabilized for
the rest of the season, with a late rally pushing them above $4/mmBtu. Mr. Calder said that was likely from technical
traders not willing to go far below the $4 barrier.
Crude markets have also played a role in two sessions of losses, traders and brokers said. Oil took massive losses on
Thursday and Friday after OPEC leaders failed to cut their production ceiling in order to help end a months-long slide
in crude prices. As traders look to meet margin calls because of that collapse, they're likely to sell their positions
in natural gas and other commodities to help raise cash, traders and brokers said.
"That was a pretty violent move down," for crude said Scott Gettleman, an independent trader in New York. The
natural-gas market has essentially stabilized, but there is so much pressure and volatility in energy markets right now
that it could easily fall another 5% to prices just above $3.70/mmBtu if it starts to slide, he added.
"It seems far away, but it gets there pretty quick these days," Mr. Gettleman said.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
December 01, 2014 14:54 ET (19:54 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.
120114 19:54 -- GMT
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