DJ Natural Gas Drops on Cooler Weather Forecasts
By Timothy Puko
Natural gas prices posted their biggest drop in more than three weeks on Monday, on signs of cooler weather and
softer-than-expected demand ahead.
Prices for the front-month July contract settled down 8.3 cents, or 3%, at $2.733 a million British thermal units on
the New York Mercantile Exchange. It was the largest one-day percentage loss in more than three weeks and the lowest
settlement since June 8.
The contract fell as soon as electronic trading opened Sunday evening and drifted lower for most of Monday as traders
checked weather forecasts on the first day of summer for the Northern Hemisphere. Weather updates showed cool
temperatures moving into the Midwest by Thursday and then pushing across the rest of the eastern states. Chicago's high
temperatures are likely to be four to seven degrees Fahrenheit below normal, and then the weekend will bring even
cooler weather, eight to nine degrees below normal for New York and Boston, according to MDA Weather Services in
Maryland.
Without hot weather, people are less likely to use their air conditioners and drive demand for gas-fired power. Gas
markets are already oversupplied because of the U.S. drilling boom, and many have said the summer must be hot and power
demand must be high to drive prices up from near three-year lows.
"When those weather reports came out, everybody who's (betting on higher prices), they're going to run for the
doors," said Scott Gettleman, an independent trader in New York.
U.S. gas output is down 1.5 billion cubic feet a day from December highs, but that may just be a temporary slowdown,
according to J.P. Morgan Chase & Co. The bank, in a note sent to clients Thursday and released to reporters Monday,
called the fall in production infrastructure-related and said it expects output to rebound to record highs.
That forecast comes at a time when several bank analysts and investors have said that monthly U.S. production
declines appear to be on the way and that growth will stall into next year. But private data providers like PointLogic
Energy and Bentek Energy have, like J.P. Morgan, attributed the recent drop in production to pipeline and processing
plant slowdowns, indicating that record production could return soon.
"I think production will come back," said Marc Kerrest, who runs Cornice Trading LLC in San Francisco. "We rallied
off nothing (last week) just from people covering (bearish bets), and it was kind of looking like the weather was going
to go away. The opportunity to sell was Friday."
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
June 22, 2015 15:15 ET (19:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
062215 19:15 -- GMT
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