Dow Jones Natural Gas - Prices Decline On Growing Supply

DJ Natural Gas Prices Decline on Growing Supply


   By Timothy Puko


  Natural gas prices are falling back as production appears to be edging higher.

  Natural gas for February delivery is down 11.4 cents, or 3.8%, at $2.867 a million British thermal units on the New
York Mercantile Exchange. The front-month contract hasn't had back-to-back sessions of gains or losses in more than a
week.

  The more actively traded March contract is down 10.4 cents, or 3.5%, at $2.831/mmBtu. Options expired at Tuesday's
close and the February contract expires Wednesday at close.

  "There is ample ... gas in inventory to meet the demand of the remaining winter season even it is colder than
normal," Dominick Chirichella, analyst at the Energy Management Institute, said in a note to clients.

  Half of U.S. homes use natural gas for heat, making winter cold typically the biggest driver for demand. But prices
have plummeted 36% since November because record production has been enough to easily cover demand, even in the coldest
weeks of the year.

  And that production is still edging higher, according to Citigroup Inc. Producers are extracting more in several
gas-rich shale formations, especially the Marcellus, its analyst Anthony Yuen said in a note to clients Wednesday. They
are quickly recovering from cold weather that can choke off supply and they keep making technological advancements that
allow each well to produce more, he said.

  That production is on pace to create a surplus of more than 4 trillion cubic feet for natural gas storage, beyond its
practical capacity, Mr. Yeun said. Prices for both 2015 and 2016 will have to come down another 30 cents/mmBtu in order
to get power producers to buy the gas that can't go into storage, he said.

  Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.87/mmBtu, compared with Tuesday's
range of $2.93-$2.97. Cash prices at the Transco Z6 hub in New York traded in a bid-ask range of $4.25/mmBtu to
$5.00/mmBtu, compared with Tuesday's range of $8.95 to $12.00.


  Write to Timothy Puko at

  tim.puko@wsj.com

  mailto:

  tim.puko@wsj.com


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  January 28, 2015 10:02 ET (15:02 GMT)

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012815 15:02 -- GMT
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