Dow Jones Natural Gas - Morning Commentary

DJ Natural Gas Falling Toward 3-Year Low on Oversupply



  By Timothy Puko


  Natural gas prices are selling off for a second-straight session with traders focused on the chance of a strongly
oversupplied market this spring.

  The front-month April contract settled down 4 cents, or 1.5%, at $2.695 a million British thermal units on the New
York Mercantile Exchange. The losses mounted on top of a 3.2% retreat Thursday that came despite data showing storage
levels shrank much more than expected.

  That move is a "cause for concern," Commerzbank said in a note.

  It shows prices have the potential to keep falling as mild spring temperatures cut heating demand and allow producers
to divert gas to storage. They will start that process this year with more gas already in storage and with expectations
that record production will keep climbing. Those healthy stocks will likely limit prices to a $3/mmBtu average in 2015,
Commerzbank said.

  And the spring is likely to be a hard fall from where prices are now, said Dean Hazelcorn, trader at the brokerage
Coquest Inc. in Dallas. Temperatures are already rising high enough to cut heating demand, and that trend will only
continue.

  "It was 50 degrees in Chicago yesterday. That's crazy," Mr. Hazelcorn said. "Any fundamental news like that is going
to keep the wind behind the marketplace. We're going lower."

  Prices are now within 8 cents of the nearly 3-year low of $2.579/mmBtu that they set Feb. 6. Prices are likely to
grind through that in the coming weeks and then keep going, Mr. Hazelcorn said.

  Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.72/mmBtu, compared with Thursday's
range of $2.80-$2.84. Cash prices at the Transco Z6 in New York last traded at $2.47/mmBtu compared with Thursday's
range of $2.73 to $2.85.


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


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  (END) Dow Jones Newswires

  March 13, 2015 09:41 ET (13:41 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

031315 13:41 -- GMT
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