DJ Natural Gas Rises on Cold Spell, Rising Demand
By Timothy Puko
Natural gas closed with its first back-to-back gains in nearly a month, as an arctic chill settling over the eastern
half of the U.S. raised heating-demand expectations through next week.
The front-month March contract settled up 8 cents, or 3.1%, at $2.677 a million British thermal units on the New York
Mercantile Exchange. Prices are up 3.8% from the 2 1/2-year low settlement from Friday during the first back-to-back
gains since Jan. 13 and 14.
High temperatures are unlikely to rise above 30 degrees Fahrenheit--and in some places not even into the
teens--across the Northeast, Ohio Valley and Great Lakes regions, according to Weather Services International in
Andover, Mass. These temperatures will be as much as 25 degrees below normal and will be part of a series of arctic
fronts that sends cold air across the East for a week, the forecaster said.
Half of U.S. homes use natural gas for heat, so the cold weather is raising expectations for demand. But the price
jump is limited because supplies grew to relatively healthy levels during a mild December and second half of January,
analysts said. The rally will likely end by Monday, said Michael Doyle, a broker at Eclipse International Inc. in New
York.
"It's definitely colder, but we still have a lot of gas around," he added.
The lack of a strong rally may be a sign the market could have farther to fall as soon as the cold front dissipates,
analysts said. It is down more than 40% since its November peak. And the muted reaction, unusually light momentum for
this kind of cold spell, strongly suggests most traders believe the market is well supplied, said Dominick Chirichella,
an analyst at the Energy Management Institute.
The U.S. Energy Information Administration raised its expectations for production this year, despite the drop in
prices. Production will average 72.8 billion cubic feet in 2015, up 0.6% from what the agency forecast a month ago and
up 3.7% from what the industry produced in 2014.
Producers are becoming more efficient, and they will be able to extract more gas at lower costs, allowing production
to rise even as commodity prices fall, the agency said in the monthly update to its Short-Term Energy Outlook. Most of
the growth will come from the Marcellus Shale, where many wells are drilled but uncompleted, waiting to add more supply
to an already healthily supplied market, EIA said.
The rampant production is going to fill storage beyond its average level both to start the spring and to start next
winter, the agency said. It forecast March will end with 1.7 trillion cubic feet in storage, 2.6% above the five-year
average.
Mr. Chirichella called the report "pretty bearish," and a "phenomenal recovery" for inventories that ended last
winter at an 11-year low.
EIA cut its price forecast for the Henry Hub benchmark price through 2016, joining several banks that have made
similar adjustments. EIA said prices would average $3.05/mmBtu this year, down 11% from its projections a month ago. It
cut its 2016 forecast by 10% to $3.47/mmBtu.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
February 10, 2015 15:33 ET (20:33 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
021015 20:33 -- GMT
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