DJ Natural Gas Sinks on Heavy Production
By Timothy Puko
Natural gas fell to its lowest settlement in more than a week as heavy production keeps a lid on prices.
The front-month August contract settled down 6.6 cents, or 2.3%, to $2.756 a million British thermal units on the
New York Mercantile Exchange. Most of the session's losses came in limited electronic trading on the Friday holiday,
which were included in Monday's settlement. Prices were nearly unchanged since electronic trading reopened Sunday
evening.
Late Thursday, the U.S. Energy Information Administration warned that record production from several states in the
middle of the shale-drilling boom had the potential to bring hub prices down even further. Much of the new production
coming from eastern states including Pennsylvania, Ohio and West Virginia is still trapped by pipeline bottlenecks, but
a series of new pipelines is going to be carrying that production out of the region soon.
Many regional spot prices there fell near to $1/mmBtu last week, less than half of the national benchmark. Even
prices in New York, a large market that long paid a premium, fell to a record low $1.24/mmBtu, and then fell again,
trading as low as 65 cents on Thursday. The low prices suggest that as new pipelines take more gas out of that region,
prices at the benchmark hub in Louisiana will fall in line, EIA said.
The EIA had said earlier last week that production hit 74.63 bcf in April, just shy of the 74.69 bcf record set in
December.
"There's still a lot of gas out there, so that's going to prevent us from running above $3," said John Woods,
president of JJ Woods Associates and a Nymex trader.
And weather forecasts don't suggest there will be enough demand to absorb all that supply, Mr. Woods and others
said. Hot weather can get people turning on air conditioning and consuming more gas-fired power, but forecasts don't
show enough widespread, intense heat to suggest a jump in prices, said Tim Evans, analyst at Citi Futures Perspective
in New York.
"We're not going to be setting any records in terms of power-sector demand," Mr. Evans said.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
July 06, 2015 15:14 ET (19:14 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
070615 19:14 -- GMT
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