Dow Jones - Natural Gas Market Goes Cold

DJ Natural-Gas Market Goes Cold

By Nicole Friedman

     NEW YORK--The benchmark U.S. natural-gas price tumbled to its biggest one-day decline since February 2014 on
expectations of a deepening supply glut.

     Forecasts for warm fall weather across swaths of the U.S. spurred the nearly 10% plunge on Monday. Above-average
temperatures at the start of heating season will undercut seasonal demand, analysts say, boosting stockpiles that
already are near record highs.

     "The market is now in absolute free fall," said Stephen Schork, editor of energy-trading newsletter The Schork
Report. "There's no real strong forecast for any weather-[related] demand in the near future."

     The North American natural-gas market has been mired in a supply glut for years amid robust output. Companies
continue to grow more efficient at extracting the fuel from shale rocks in Pennsylvania, Texas and elsewhere, and
they're able to maintain production even as gas prices plumb three-year lows.

     But Monday's selloff nevertheless is another blow to energy producers, which now must grapple with falling
natural-gas prices in addition to low oil prices. Producers have struggled with persistently low gas prices for years
and are now seeing additional threats to their earnings due to the past year's plunge in oil prices.

     Many global commodity markets have suffered from high supplies and concerns about demand, as years of investments
in new production collided with slower-than-expected economic growth. Energy producers have sharply cut spending on new
drilling this year in response, but many analysts and investors expect both oil and natural-gas prices to remain low
through the end of 2015 and into 2016 as large inventories continue to pressure the market.

     However, households and industrial consumers will continue to benefit as natural-gas prices continue to drop.
About half of U.S. households use natural gas as their main heating fuel.

     November natural gas slid 22.4 cents, or 9.8%, to $2.062 on the New York Mercantile Exchange, the lowest close
since April 2012 and the largest one-day percentage drop in 20 months.

     Natural-gas prices typically rise ahead of the winter as colder weather sparks indoor-heating demand. But weather
forecasts released Sunday night called for warmer-than-average temperatures in the next two weeks. Meteorologists
widely expect moderate temperatures to persist through at least the first half of the winter due to El Ni??o, a
weather phenomenon that tends to upend temperature and precipitation pattern world-wide.

     Natural-gas inventories usually rise through the last week of October as producers store gas ahead of the winter
season, when demand is highest. But analysts say producers could keep adding to storage into November this year,
sparking concerns that storage facilities could near capacity if inventories continue to rise.

     As of Oct. 16, inventories stood at 3.814 trillion cubic feet, 4.5% above the five-year average level for that
time of year.

     Mr. Schork, who added to his bets on lower natural-gas prices last week, said he sees an 87% chance that
stockpiles hit a record by the end of October.

     Write to Nicole Friedman at nicole.friedman@wsj.com


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  (END) Dow Jones Newswires

  October 26, 2015 15:57 ET (19:57 GMT)

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102615 19:57 -- GMT
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