Dow Jones Natural Gas - Market Rallies On "Scary Cold" Forecast

DJ Natural Gas Rallies on 'Scary Cold' Forecast

By Timothy Puko

     Natural gas prices ended a four-session losing streak on an afternoon rally as updated weather reports showed a
blast of extreme cold coming in mid-February.

     The front-month March contract settled up 7.4 cents, or 2.8%, at $2.754 a million British thermal units on the New
York Mercantile Exchange. It traded at losses for large parts of the morning before rallying to its biggest one-day
gain in a week.

     The Northeast is going to be at the epicenter of a cold front with temperatures reaching around
15-degrees-Fahernheit-below normal by mid-February, according to models from WeatherBELL Analytics LLC in New York.
Several meteorologists had been predicting February cold limited to the Northeast, but WeatherBELL is showing midmonth
temperatures at least five-degrees-Fahrenheit-below normal covering the country as far west as the Mississippi River.
The forecasters called it "scary cold."

     "At the very least it is showing that trend to expand this cold westward in a more permanent fashion," WeatherBELL
analysts wrote in a note to clients. "This borders on incomprehensible cold in the Northeast."

     For the rally to last, traders will need to see that cold weather disrupting supply, Aaron Calder, senior market
analyst at energy-consulting firm Gelber Associates in Houston, said in a note to clients. If the cold created strong
demand and supply disruptions for two to three weeks, it could cause inventory concerns, he said.

     Prices had been sliding because of robust supply growth outweighing tepid demand. Natural-gas consumption is
usually strongest in the winter, because half of U.S. households use natural gas as their primary heating fuel. But the
country would have needed a severe winter to absorb the record supply coming from the shale gas boom, and temperatures
have been relatively normal instead.

     RBC Capital Markets on Tuesday cut its forecast price for natural gas futures by 13.3% to $3.25/mmBtu for 2015. It
expects production to keep growing by 3.5% this year despite the steep drop in prices since November.

     Nicole Friedman contributed to this article.

  Write to Timothy Puko at Timothy.Puko@wsj.com


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  February 03, 2015 15:51 ET (20:51 GMT)

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