Dow Jones - Warm Fall Weather Sends Natural Gas Sliding

DJ Warm Fall Weather Sends Natural Gas Sliding

By Nicole Friedman

  NEW YORK--Natural-gas prices slumped Monday after weather forecasts called for warmer-than-average temperatures in
the next two weeks, curbing investors' expectations for the nation's heating demand.

  November natural gas recently slid 10.9 cents, or 4.8%, to $2.177 a million British thermal units. Futures traded at
their lowest intraday levels since June 2012 and are on track for their biggest daily decline since August.

  Cold weather fuels demand for natural gas, which is the main heating fuel in about half of all U.S. households.
However, a mild autumn has kept a lid on consumption, a trend that is expected to persist. Some analysts expect that El
Ni??o, a weather phenomenon that tends to upend temperature and precipitation pattern world-wide, will cause a mild
winter in the U.S. this year.

  Weather forecasts released Sunday night called for "significant warm trends" across much of the U.S. in the next two
weeks, according to MDA Weather Services.

  "The main driver for the new round of selling has been the latest...temperature forecasts, which are now projecting
above-normal temperatures across most of the U.S. into the second week of November," said Dominick Chirichella, analyst
at the Energy Management Institute, in a note. "The new warming trend will mitigate most heating-related demand for the
next several weeks."

  The North American natural-gas market has been mired in a supply glut for years amid robust output. As of Oct. 16,
inventories stood 4.5% above the five-year average level for that time of year. Some analysts have warned that storage
facilities could near capacity if inventories continue to rise.

  "Mild weather forecasts for early winter will add stress to already-surplus storage levels," said Morgan Stanley in a
note.

  Bank of America Merrill Lynch cut its natural-gas forecast for the end of 2015 to $3/MMBtu from $3.50/MMBtu. The bank
now expects prices to average $2.70/MMBtu in the fourth quarter, down from its previous forecast of $3.20/MMBtu.

  "A warm winter is the last thing this market needs," the bank said in a note to clients.

  Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.135/mmBtu, compared with Friday's
range of $2.24-$2.285. Cash prices at the Transco Z6 hub in New York last traded between $1.95 and $2.30/mmBtu,
compared with Friday's range of $2.08-$2.15.

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


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  (END) Dow Jones Newswires

  October 26, 2015 10:39 ET (14:39 GMT)

  Copyright (c) 2015 Dow Jones & Company, Inc.

102615 14:39 -- GMT
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