Dow Jones - Natural Gas Retreats To New 3-Year Low

DJ Natural Gas Retreats to New Three-Year Low

By Timothy Puko

     Natural gas prices flopped to their lowest point in more than three years as a historically warm December keeps
limiting expectations for demand.

     Temperatures across the East and in most of the country's biggest markets for natural-gas heating will be more
than 15 degrees above normal through Monday, said MDA Weather Services in Maryland. Winter heating demand is usually
the biggest driver for gas consumption and prices, but this December is likely to be one of the warmest five on record,
MDA said.

     That prediction comes on top of a fall that has already been warm. Stockpiles kept building up in November, a time
when colder weather usually causes rising demand to prompt draining storage. Instead, they are still at near-record
highs, 15% above levels from a year ago and 6.5% above the five-year average despite a larger-than-expected draw last
week, the U.S. Energy Information Administration said Thursday.

     "The idea that we have tons of gas in storage and more mild weather in the foreseeable future, (gas prices) can't
overcome...those two overwhelming facts," said Kent Bayazitoglu, analyst at the energy-consulting firm Gelber &
Associates in Houston.

     Prices for the front-month January contract settled down 4.7 cents, or 2.3%, at $2.015 a million British thermal
units on the New York Mercantile Exchange. It is the lowest settlement since April 2012.

     The fall brought gas down from gains that had been higher than 1% after the EIA's data release. It showed
stockpiles fell by 76 billion cubic feet of natural gas to storage in the week ended Dec. 4. That is 13 bcf more than
the average forecast from analysts and traders surveyed by The Wall Street Journal and beyond what any of those
forecasters predicted.

     The EIA update is widely considered one of the best measures of supply and demand for the natural gas market. The
larger-than-expected drawdown from stockpiles would suggest larger demand or smaller supply than expected.

     Suppy was below normal, and analysts and traders may have miscalculated how much demand for gas heat there was
last week, said Dominick Chirichella, analyst at the Energy Management Institute. His prediction for a 75-bcf draw was
the closest to the EIA's report.

     "The market just underestimated how cold it was last week," he said. "It was pretty cold."

     MDA, however, said heating-degree days in the gas market, a metric that tallies heating-related demand, were about
8.4% below the 30-year average during the period from Nov. 27 to Dec. 3. Expectations were more likely off from people
conserving less and power plants burning more because of low prices, and adjustments in demand and data collection from
the EIA that are common around holidays, Mr. Bayazitoglu said. This reporting week started just after Thanksgiving.

     Those issues are likely enough for traders to overlook the miss and continue selling gas because of the high
stockpiles and warm weather forecasts, analysts said.

     "You need winter," said Donald Morton, senior vice president at Herbert J. Sims & Co. "The natural gas spike of
supply is way outpacing demand."

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


  (END) Dow Jones Newswires

  December 10, 2015 15:21 ET (20:21 GMT)

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

121015 20:21 -- GMT
------