DJ Natural Gas Surges on Stronger Demand
By Timothy Puko
Natural gas is extending its rally to a third session with traders trying to pounce on stronger demand.
Natural gas for February delivery is up 3.6 cents, or 1.1%, at $3.269 a million British thermal units on the New York
Mercantile Exchange. Gas is now up 17% since Monday's close.
Demand surged to some of its highest levels in a decade at the start of the month, and it could be stronger than
expected at the end of the month, too.
Buyers have flooded in this week as weather reporters started predicting a late January that will be significantly
colder than originally expected. Half of all U.S. homes use natural gas for heat, making the winter heating season the
big driver for demand.
Many have been buying ahead of the weekly EIA storage report, scheduled for 10:30 a.m. EST Thursday. Storage levels
likely fell by 231 billion cubic feet, 22% more than average, in the week that ended Friday, according to the average
forecast of 18 analysts and traders surveyed by The Wall Street Journal. That would be among the largest withdrawals in
20 years of history, according to the EIA.
Though record production and mild temperatures sent gas into a bear market to start the winter, the new weather
forecasts and the strong draw from storage reminds traders that two months of winter remaining can still bring severe
cold and high demand, analysts have said.
"There is still a lingering fear for those kinds of events," said Gene McGillian, an analyst at Tradition Energy.
The cold has been severe enough to slow drilling and reduce supply by more than 2 billion cubic feet a day, according
to energy investment bank Tudor, Pickering, Holt & Co. It pointed out that the supply freeze-offs and stronger demand
are bringing the market back into a temporary balance after it spent much of the year oversupplied by at least 3
billion cubic feet a day.
"That's an extraordinary change," it said in a note.
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $3.30/mmBtu, compared with
Wednesday's range of $3.0725-$3.25. Cash prices at the Transco Z6 in New York traded in a bid-ask range of $5.00/mmBtu
to $9.00/mmBtu, compared with Wednesday's range of $4.60 to $4.75.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
January 15, 2015 09:39 ET (14:39 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
011515 14:39 -- GMT
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