Dow Jones Natural Gas - Soft Demand Outlook Encourages Selling

DJ Natural Gas Declines as Soft Demand Outlook Encourages Selling


   By Timothy Puko


  Natural gas had its second-biggest losing session since February as a tepid demand outlook and pessimism across the
energy sector continue to rip through the market.

  The front-month January contract settled down 20.7 cents, or 5.4%, at $3.595 a million British thermal units on the
New York Mercantile Exchange. Prices have fallen 20% from the season's high settlement on Nov. 20 and are approaching
their lowest closing price of 2014, $3.561/mmBtu. The front-month contract saw bigger losses in one session only once
since February, but the 6.1% decline recorded Nov. 28 came over two days because the market had no settlement on
Thanksgiving.

  Weather forecasts are encouraging traders to sell. Unseasonably warm temperatures forecast across most of the country
almost until Christmas are likely to limit demand for gas heat. Half of all U.S. homes use natural gas for heating, and
several analysts have said the market is at risk of falling prices unless severe cold drives demand.

  Traders are now focused on the record amount of gas coming from the country's drilling boom, said Gene McGillian, an
analyst at Tradition Energy.

  "The minute you don't have (extreme) weather, all people are looking at is the amount of gas coming out of the
ground," he added. "Without demand, prices basically plunge."

  Prices have dropped in six of the last seven sessions. Friday brought gains greater than 4%, but brokers and analysts
called it temporary, saying traders who bet that prices would fall just wanted to cash out those bets and buy in to
close positions before the weekend.

  Traders won't seriously bid up prices until they see a forecast for severe cold or some other unforeseen factor that
could ramp up demand, said John Woods, president of JJ Woods Associates and a Nymex floor trader. That hasn't come yet,
leaving few willing to guess where the market will bottom before peak demand season for home heating starts next month,
he added.

  Oil prices are also adding to the selling pressure across markets, said Michael Doyle, a broker at Eclipse
International Inc. in New York. Oil prices fell more than 4% Monday, part of a sharp decline that has grown sharper
since the Organization of the Petroleum Exporting Countries decided last month not to take drastic action to boost
prices. As oil investors lose money, they have to sell other holdings to raise cash, and natural gas is a popular
target for liquidation, Mr. Doyle said.

  "If anyone's got any length at all, they're thinking about at least lightening up their boat," he said.

    FUTURES              SETTLEMENT        NET CHANGE
    Nymex January        $3.595            -20.7c
    Nymex February       $3.623            -20c
    Nymex March          $3.579            -19.5c

    CASH HUB             RANGE             PREVIOUS SESSION
    El Paso Perm        $3.33-$3.395       $3.15-$3.24
    El Paso SJ          $3.36-$3.40        $3.17-$3.26
    Henry Hub           $3.43-$3.615       $3.40-$3.48
    Katy                $3.39-$3.48        $3.24-$3.40
    SoCal               $3.53-$3.645       $3.33-$3.60
    Tex East M3         $3.38-$3.59        $3.15-$3.27
    Transco 65          $3.45-$3.57        $3.35-$3.45
    Transco Z6          $3.65-$3.80        $3.50-$3.61
    Waha                $3.345-$3.39       $3.17-$3.25


  Write to Timothy Puko at tim.puko@wsj.com


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  (END) Dow Jones Newswires

  December 08, 2014 15:43 ET (20:43 GMT)

  Copyright (c) 2014 Dow Jones & Company, Inc.

120814 20:43 -- GMT
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