DJ Natural-Gas Prices Surge on Cold Weather Forecasts
By Timothy Puko
Natural-gas futures were surging for their second-straight session on Wednesday, as weather forecasts continue to
grow colder for the second half of January.
The gains show how winter can still move the market upward, analysts and a trader said. A mild December and
predictions for a warmer-than-normal late January had led to a selloff in recent weeks. But the late-January forecasts
are reversing course, boosting expectations for gas demand to heat homes.
Natural gas for February delivery was up 16.5 cents, or 5.6%, at $3.108 a million British thermal units on the New
York Mercantile Exchange. The gains come on top of a 5.3% increase on Tuesday, when forecasts started to change.
"The market had just gotten ahead of itself with prices," said John Kilduff, founding partner of Again Capital in New
York. Late last week he bought futures contracts, saying prices would soon surge above $3/mmBtu. "This should get the
market's attention that there's still some demand to be dealt with here."
This is the first time natural gas has traded above $3/mmBtu since Jan. 5. It is on pace to be the largest
two-session stretch of gains by percentage since February, when prices surged to nearly $6.50/mmBtu.
While the weather looks colder, it won't be as severe as it was during February's price spike, said Phil Vida, lead
forecaster at MDA Weather Services. There aren't likely to be new record-low temperatures, he added. In the major
markets for gas-heating demand, Chicago looks like it will have the coldest spell, about 5-degrees-Fahernheit below
normal temperatures, according to MDA's forecast.
That coldest spell is likely to come in the last week of the month, and traders often have the most skepticism for
forecasts that far in advance. But the gas market has hit its most volatile period in nearly a year, and that puts more
emphasis on the extended forecasts, traders said. With this type of volatility, they have to anticipate more to try to
stay ahead of trends, they said.
Technical trading has also added to the sharp upward swing in momentum, they said. Bets from money managers this
month had been largely in favor of falling prices. Many of those investors have to scramble to buy in and close out
those bets when it appears weather may swing colder and boost demand, turning the market against them.
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $3.15/mmBtu, compared with Tuesday's
range of $2.855-$2.94. Cash prices at the Transco Z6 hub in New York traded in a bid-ask range of $4.00/mmBtu to
$6.00/mmBtu, compared with Tuesday's range of $4.40 to $6.00.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
January 14, 2015 10:01 ET (15:01 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
011415 15:01 -- GMT
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