DJ Natural Gas Rising on Hotter Weather Forecasts
By Timothy Puko
Natural gas surged to its highest settlement in more than two weeks as hotter weather forecasts pushed demand
expectations higher for a second-straight day.
Prices for the front-month July contract rose 14.1 cents, or 5.2%, to $2.846 a million British thermal units on the
New York Mercantile Exchange. It is up 9.9% over two days, the largest back-to-back gains since mid-January.
Weather forecasts grew incrementally warmer for the second-straight day. WeatherBELL Analytics LLC called it a "heat
wave" for the Southeast and Mid-Atlantic regions in its midday update. Other weather forecasters have said the heat
won't be that strong, but it is likely to crest 90 degrees Fahrenheit in the Mid-Atlantic region, the hottest weather
of the season, said Commodity Weather Group LLC in Bethesda, Md.
Hot weather gets people to turn on their air conditioners, and power plants burn more gas to meet the demand. Some
traders have become concerned prices have fallen too far for early June, when there is still a chance ahead for a long,
hot summer to ramp up demand.
"You can make a pretty good argument for the upside," said Bob Yawger, director of the futures division at Mizuho
Securities USA Inc. "The temperature seems to tick, tick, tick higher and higher."
The forecasts come a few days after the largest buildup of bearish traders in gas since the financial crisis. There
were more bearish positions on gas at June 2 than at any time since 2008, according to regulatory data.
The warm forecasts could be enough to scare some of them into quickly unwinding their bets that would profit if the
market falls, analysts and brokers said. Such trades are closed out by buying futures to cover the position, which may
be feeding the rally if many traders are doing that all at once, analysts said.
"That set the stage for the liftoff," said Todd Garner, managing partner at hedge fund Protec Energy Partners LLC
based in Boca Raton, Fla., which manages $100 million in energy commodities. "It was oversold, the weather changed, and
then, on top of that, the EIA comes in."
The U.S. Energy Information Administration on Tuesday trimmed its gas production forecast for every quarter through
2016, adding to evidence that output may be plateauing after a long period of rampant growth. EIA still expects output
to return to setting monthly records in July, but monthly growth rates will be a fraction of a percentage point,
compared with growth which often exceeded 1% a month in 2014.
Pipeline data suggests a nearly 2% decline nationwide just on Tuesday, according to data provider PointLogic Energy.
Its models show production fell 1.4 billion cubic feet to 71.1 bcf on Tuesday with the largest declines coming from
Pennsylvania, where Marcellus Shale production has been a big driver for the U.S. gas boom.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
June 09, 2015 15:22 ET (19:22 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
060915 19:22 -- GMT
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