Dow Jones - Natural Gas Makes Small Gains Ahead of Winter Heating Season

DJ Natural Gas Makes Small Gains Ahead of Winter Heating Season



  By Timothy Puko


  Natural gas made small gains Tuesday but is still lingering near three-year lows as healthy supplies cap any rally
ahead of the winter heating season.

  Prices for the front-month November contract settled up 2 cents, or 0.8%, to $2.47 a million British thermal units on
the New York Mercantile Exchange. Prices are within 4 cents of the three-year-low close price they set last week.

  Analysts largely chalked up the gains to profit-taking from bearish traders who benefited from last week's decline.
There is also a tendency to buy gas ahead of the winter heating season, the market's largest driver for demand, they
said.

  Several banks have cut their price forecast in recent days. While few go far below current prices, they also said
there is little reason to expect any rally back to the $3/mmBtu prices that were common last year.

  Several pipelines are now congested with too much gas and spot prices are weak, said Donald Morton, senior vice
president at Herbert J. Sims & Co. The current bear market could last years while demand catches up, he said.

  Several forecasters are also expecting a mild winter and tepid demand for heating as the El Nino weather phenomenon
is likely to bring above-normal temperatures to the northern part of the country. The U.S. Energy Information
Administration said Tuesday in its Short-term Energy Outlook that it expects Henry Hub prices below $3/mmBtu for the
rest of the year and consumers' gas heating bills to fall 10% from last year.

  Producers have choked back about 1 billion cubic feet of gas in wells where they are limiting production, waiting for
higher prices to open the taps and sell, said Rick Margolin, senior analyst at Genscape. Production companies have
sharpened their ability to hold back gas and release it quickly when they can sell it at a better price, which is
likely to limit how much prices can rise this winter, he said.

  "It can come on pretty quickly," he said. That can "flood the market, and squash that volatility."


  Write to Timothy Puko at tim.puko@wsj.com


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  (END) Dow Jones Newswires

  October 06, 2015 15:30 ET (19:30 GMT)

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