DJ Natural Gas Prices Rise on Warming Weather, Falling Production
By Timothy Puko
Natural gas prices made small gains Monday as warming weather and falling supply helped the market bounce back from
Friday's three-week low.
The front-month September contract gained 2.9 cents, or 1.1%, to $2.745 a million British thermal units on the New
York Mercantile Exchange. The boost sent gas back to the middle of the 31 cent trading range it has settled in every
session for nearly two months.
Part of the gain comes from weather forecasts that are now retreating from predictions of widespread below-normal
temperatures for this week. In the summer, hot weather can lead to stronger demand for gas-fired power to run air
conditioners.
A hot spring has already led power plants to consume their second-highest amount of natural gas ever for the month of
May, the U.S. Energy Information Administration said late Friday. It reported that gas deliveries to power plants hit
23.7 billion cubic feet a day that month, nearly 14% more than May 2014.
The agency's "Natural Gas Monthly" also showed the country's production hit just 73.6 bcf in May, more than 1 bcf
less than expected and down 1 bcf from April production. That included "big declines" from several states that have led
that ongoing oil-and-gas boom and is "the cornerstone to our more bullish" estimate of $4 gas on the way in the months
to come, Tudor, Pickering, Holt & Co., a Houston investment bank, said in a note Monday morning.
"With the lower prices you have to expect production to get cut," said Scott Gettleman, an independent trader in New
York. "So a combination of hotter weather and less production is going to result in a rally."
However, the weather forecasts aren't extreme at all and have limited impact to boost prices, Aaron Calder, senior
market analyst at energy-consulting firm Gelber & Associates in Houston said in a note. Prices didn't rise as much in
later months as they did in the September contract, and even the front-month did briefly dip into losses around noon.
"The hotter weather increases the immediate value of gas," Mr. Calder said, adding that supply is still large.
"However traders are finally getting a handle on just how quickly storage is filling up."
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
August 03, 2015 14:47 ET (18:47 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
080315 18:47 -- GMT
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