Dow Jones Natural Gas - Prices Drop As Production Soars

DJ Natural Gas Drops as Production Soars

By Christian Berthelsen

     Natural gas futures tumbled 3.5% Friday in the wake of data showing the U.S. is beginning to develop a surplus of
the fuel thanks to soaring domestic production.

     In the selloff, the market looked past forecasts for a return to more normal winter temperatures in the coming
days, with a cold blast expected to settle over much of the U.S. heading into the new year. This could boost demand for
natural gas to heat homes and businesses.

     Natural gas for January delivery was down more than 9 cents at $3.5513 a million British thermal units, its lowest
point Nov. 14, 2013. The selloff extended Thursday's loss and put the futures in bear market territory after losing
roughly 20% in the last month.

     Though the U.S. has begun to draw on natural gas supplies for fall and winter heating needs, continued booming
production from shale fields is helping to replenish supplies. As a result, withdrawals have been running less than
average.

     Weekly data released by the U.S. Energy Information Administration on Thursday showed total domestic inventories
rose above year-ago levels for the first time in nearly a year and stand 7.3% below average--a gap analysts believe
could close in the coming weeks thanks to mild December temperatures and production of as much as 8 billion cubic feet
a day of gas.

     "Stymied demand and record production continue to pressure prices lower, " research consultancy Schneider Electric
analyst Matt Smith said in a note.

     In the physical market, cash prices for next-day delivery of gas at the benchmark Henry Hub last traded at $3.46 a
million Btus, below Thursday's range of $3.55-$3.715. Prices for gas at the Transco Z6 hub in New York traded in a
bid-offer range of $3.25-$3.75, compared with Thursday's range of $3.70-$3.80.


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  (END) Dow Jones Newswires

  December 19, 2014 09:43 ET (14:43 GMT)

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121914 14:43 -- GMT
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