DJ Natural Gas Rallies as Bears Exit
By Timothy Puko
Natural gas surged Tuesday afternoon as more optimistic demand forecasts and data showing falling production are
chasing bears from the market.
Prices for the front-month June contract gained 4.9 cents, or 1.9%, to $2.698 a million British thermal units on the
New York Mercantile Exchange. It is the second straight winning session and gas rallied more than 3.5% intraday after
it fell to $2.606/mmBtu just after noon.
Weather models grew slightly warmer in their midday updates, which built up expectations for gas demand at power
plants that are feeding air conditioners, meteorologists said. It wasn't a big change, but many traders are already
nervous and the change likely pushed some to cover their bets, said Marc Kerrest, a trader in San Francisco.
"It wasn't that impressive, but it seemed like that was driving things along," said Matt Rogers at Commodity Weather
Group LLC in Bethesda, Md.
The most recent regulatory data available shows three bearish, or short, bets in the gas market for every two bullish
bets. Many traders get concerned when a bearish trade gets that crowded and small bullish factors in the market can all
get them to push out of their positions at once, causing a spate of buying that raises prices. Several traders in the
market believe similar conditions led to a three-week bull run in gas in May.
"When there's just a huge short position like we have in the market right now, there's always the potential for a
squeeze like we had last month," Mr. Kerrest said.
Declining production is adding to that nervousness, other brokers and analysts have said this week. The U.S. Energy
Information Administration said in a monthly report released Friday that production fell in March for the second time
this year, and it also cut the production numbers it had already reported for earlier this year.
Some traders are now questioning the accuracy of the data they are getting and their understanding of the market's
supply-and-demand balance, said Frank Clements, co-owner of Meridian Energy Brokers Inc. outside New York. While
production is still at near-record levels and the market is oversupplied, many traders are simply covering their bets
to protect themselves rather than continuing a hard selloff that had caused a five-session losing skid last week, he
said.
"That put the kibosh on the drop that we had," Mr. Clements said. "When there's uncertainty, people are unsure of how
to react."
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
June 02, 2015 15:50 ET (19:50 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
060215 19:50 -- GMT
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