°¿°

[Myself °¿°]

Natural Gas Falls With Stockpiles and Temperatures Still High
Prices plummeting to four-week low
By TIMOTHY PUKO
Nov. 20, 2015 10:29 a.m. ET
http://www.wsj.com/articles/natural-gas-falls-with-stockpiles-and-temperatures-still-high-1448033397
Natural gas prices are plummeting to a four-week low as mild temperatures and record-high stockpiles continue a months-long route for the heating fuel.

Futures for December delivery recently traded down 7.7 cents, or 3.4%, at $2.199 a million British thermal units on the New York Mercantile Exchange. The fall would be the largest one-day percentage drop since prices fell to a three-year low in late October and comes on top of a 3% decline yesterday.

Weather forecasts are showing a mix of above- and below-normal temperatures, but moved sharply warmer for next week in many of the largest Midwestern and Eastern markets for gas heating. The popular U.S. weather models moved dramatically warmer overnight, according to Commodity Weather Group LLC in Bethesda, Md., though meteorologists tempered some of those predictions.

About half of U.S. homes use gas for heat, making winter cold the market’s biggest driver of demand. This year, an especially strong manifestation of the weather phenomenon El Nino has many meteorologists calling for a mild winter across the northern U.S. That has many traders expecting low natural-gas prices though the winter, especially after a warm start to autumn.

Without immediate heating demand, natural gas producers are likely to keep sending gas into storage through next week rather than drawing it out to sell for heating fuel, which is what usually happens at this time of year, analysts said. Stockpiles hit an unprecedented 4 trillion cubic feet last week, the U.S. Energy Information Administration said yesterday, adding to the pressure to sell.

Several bank analysts, including Goldman Sachs Group Inc., are warning that prices are unlikely to rise very far in the months to come. In addition to the high storage levels, gas producers are choking back another 1 billion cubic feet of supply at wells that are already drilled and ready to produce when the price is right, according to Genscape Inc., a data provider. That likely limits how much prices can rise even when demand surges, analysts and traders have said.

“Near-term gas rally [is] unlikely given ample storage and the likelihood of incremental supply on the sidelines against a backdrop of El Nino warm-winter concerns,” energy-focused investment bank Tudor, Pickering, Holt & Co. said in its Friday morning note.

Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.19/mmBtu, compared with Thursday’s range of $2.105-$2.25. Cash prices at the Transco Z6 hub in New York last traded at $2.20/mmBtu, compared with Thursday’s range of $2.02-$2.15.

Write to Timothy Puko at [e-mail]