Dow Jones Natural Gas - Natural Gas Drops To 2-Year Low As Forecast Warms Up

DJ Natural Gas Drops to Two-Year Low as Forecast Warms Up

  (Adds price table.)


  By Christian Berthelsen


  Natural gas futures fell to their lowest level in more than two years Monday after forecasts called for a mid-January
warm-up that was expected to crimp gas-fired heating demand, extending losses that have dragged the market into bear
territory.

  Natural gas futures for the front-month February contract lost 15.1 cents, or 5.1%, to settle at $2.7950 a million
British thermal units, the lowest close since Sept. 19, 2012. Futures have lost more than 35% since their November peak
as exploding domestic production has been met with largely tepid demand amid mild winter weather thus far this season.

  Energy companies have increased natural gas production by 4 billion cubic feet a day and that amount may grow to 5
billion cubic feet a day early this year, according to Morgan Stanley. Gas stockpiles as measured by the U.S. Energy
Information Administration are now 8.8% above year-ago levels and just 2.2% below average. Supplies have largely
recovered from the massive withdrawals prompted by the severe cold of last year's winter.

  Meanwhile, newly revised weather forecasts are calling for a warm-up throughout most of the continental U.S. later
this week and into next, cutting into the heart of what should be peak demand season for gas-fired heating. The
much-above-normal temperatures are expected to stretch from Montana to Maine and south to Arkansas. Natural gas heats
more than half the homes and offices in the U.S., and the fuel is used to power electricity generation as well.

  "Mother Nature is not cooperating with the bulls," said Tom Saal, a broker with INTL FCStone. "We've obviously got
storage that's quite adequate."

  Analysts say little short of a record-breaking demand surge could clear the oversupply now developing in the market.
"A bearish haze is hovering over the natural gas market," energy investment bank Simmons & Co. said in a note.

  In December, prices fell into a bear market, defined as a 20% drop from a recent peak.

FUTURES         SETTLEMENT   NET CHANGE
Nymex February   $2.795      -15.1c
Nymex March      $2.795      -15.2c
Nymex April      $2.788      -14.3c

CASH HUB         RANGE       PREVIOUS SESSION
El Paso Perm  $2.79-$2.85     $2.83-$2.86
El Paso SJ    $2.7850-$2.84   $2.83-$2.90
Henry Hub     $2.88-$2.9150   $2.92-$3.0250
Katy          $2.84-$2.90     $2.85-$2.9475
SoCal         $2.89-$2.93     $2.90-$2.96
Tex East M3   $4.00-$4.75     $4.00-$6.00
Transco 65    $2.85-$2.93     $2.85-$3.02
Transco Z6    $9.50-$13.00    $10.00-$14.50
Waha          $2.825-$2.825   $2.84-$2.90


  --Timothy Puko contributed to this article

  --Write to Christian Berthelsen at christian.berthelsen@wsj.com


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  (END) Dow Jones Newswires

  January 12, 2015 15:56 ET (20:56 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

011215 20:56 -- GMT
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