Dow Jones Natural Gas - Prices Drop as Temperature Forecast Rises

DJ Natural Gas Futures Drop as Temperature Forecast Rises


   By Christian Berthelsen


  Natural gas prices fell sharply Tuesday as weather forecasts turned warmer in the coming weeks, dashing expectations
for gas-fired heating at the peak of winter demand season.

  Natural gas for February delivery was down 19.2 cents, or 6.2%, at $2.935 a million British thermal units on the New
York Mercantile Exchange. The losses extended Friday's drop and erased last week's gains, which came amid forecasts for
a bout of extreme cold to blanket much of the eastern U.S. and a larger-than-expected draw on supplies according to
weekly data from the U.S. Energy Information Administration.

  Revisions to the weather outlook for the next two weeks came up with a much warmer forecast through the end of the
month and a much less extreme cold front in the early days of February. The changes play in to the positioning of
financial investors in the market, with money managers such as hedge funds having a net bearish bet against the market,
according to data released Friday by the U.S. Commodity Futures Trading Commission.

  "Above-normal conditions continue to spread in from the West for the last week of the month, alleviating fears of
inclement conditions, while heating demand is set to be below normal across pretty much the entire U.S. for the next
seven days," research consultancy Schneider Electric said in a note.

  The anticipated drop in demand comes as robust domestic production continues to deliver ample natural gas supplies
throughout the winter. As of last week, the U.S. had 2.8 trillion cubic feet of natural gas in storage, 11% more than a
year ago and just 3.8% below average for this time of year. The warmer temperatures could also help prevent a
phenomenon known as "freeze offs," in which temperatures become too cold to continue producing gas, curbing supplies.

  In the physical market, cash prices for next-day gas delivery at the benchmark Henry Hub in Louisiana last traded at
$2.91 a million Btus, below Friday's trading range of $3.055-$3.14. Physical gas at the Transco Z6 hub in New York
traded in a bid-offer range of $3.50-$4.20, below Friday's range of $4.50-$5.10.


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


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  (END) Dow Jones Newswires

  January 20, 2015 10:23 ET (15:23 GMT)

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012015 15:23 -- GMT
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