Dow Jones Natural Gas - Market Surges to January High On Colder Weather Forecasts

DJ Natural Gas Surges to January High on Colder Weather Forecasts

By Timothy Puko

     Natural-gas prices surged to their highest one-day percentage gain in 11 months as weather forecasts showed
colder-than-expected temperatures toward the end of January.

     Gas has rallied for two days, pushing its strongest day of gains and back-to-back gains, by percentage, since
mid-February. Futures are up nearly 16% since Monday's close.

     The move demonstrates how powerful a force winter can still be at boosting the market, analysts and traders said.
Record production, tepid demand from a mild December and predictions for a warmer-than-normal late January had led to a
massive selloff, dropping prices by more than a third since November. But the late-January forecasts are reversing
course, boosting expectations for gas demand to heat homes.

     "This should get the market's attention that there's still some demand to be dealt with here," said John Kilduff,
founding partner of Again Capital in New York. Late last week he said he was buying futures contracts, predicting that
prices would soon surge above $3 a million British thermal units. "The market had just gotten ahead of itself with
prices."

     The front-month February contract settled up 29 cents, or 9.9%, at $3.233/mmBtu on the New York Mercantile
Exchange. It set a new three-week high closing price and intraday price.

     A relaxed Pacific Jetstream is looking more likely for the last week of the month, increasing the chance for an
arctic blast to hit the country, Weather Services International in Andover, Mass., said in its morning update. It
probably won't be extreme enough to set any record-low temperatures, though, said Phil Vida, lead forecaster at MDA
Weather Services. In the major markets for gas-heating demand, Chicago looks like it will have the coldest spell, about
5-degrees-Fahernheit below normal, according to MDA's forecast.

     The swing does change the overall look for January, making the whole month colder than average, meteorologists
said. It adds to a cold start to the month that sent demand for natural gas as high as 129 billion cubic feet a day,
its fifth highest since 2005, according to the U.S. Energy Information Administration. About half of all U.S. homes use
gas for heat, making winter the common peak for prices.

     That strong demand is likely to show up in this week's EIA storage update. Storage levels likely fell by 231 bcf,
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. The EIA is scheduled to release its storage data for the week on Thursday at 10:30
a.m. EST.

     That type of demand, combined with the weather, is forcing bears out of the market before that EIA update, traders
said. Bets from money managers this month had been largely in favor of falling prices. Many of those investors now have
to scramble to buy in and close out those bets as the weather and stronger demand start to turn the market against
them.

     "You've got to take the money off the table," said John Woods, president of JJ Woods Associates and a Nymex trader
who had also been betting on rising prices in the past week. "Everything indicates a move upward, so they're just
jumping...beforehand. Those who didn't will probably lose out."

     Longer-term forecasts also suggest this won't be the end of severe cold. Both Commodity Weather Group and
WeatherBELL Analytics released seasonal updates Wednesday reaffirming their predictions for a cold end to winter.

     Commodity Weather Group says "February cold could rival 2014 levels at times," referring to the polar front that
set record-lows nationwide last year and sent gas prices up to nearly $6.50/mmBtu. WeatherBELL calls unseasonably warm
weather forecasted for next week "an isle in a sea of cold." It predicts the Midwest and South will average
temperatures 2- to 6-degrees-Fahernheit below normal from February through April.

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


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  (END) Dow Jones Newswires

  January 14, 2015 15:17 ET (20:17 GMT)

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