THE WALL STREET JOURNAL

Natural Gas Prices Rise on Warming Weather, Falling Production

Forecasts are retreating from predictions of widespread below-normal
temperatures for this week


By Timothy Puko / Aug. 3, 2015 10:23 a.m. ET


Natural gas prices bounced back from a three-week low Monday as warming weather and falling
supply show signs the market could be slowly balancing.


Natural-gas futures for August delivery recently gained 1.9 cents, or 0.7%, to $2.735 a million
British thermal units on the New York Mercantile Exchange. The boost puts gas back to the
middle of the 31 cent trading range it has been in since June 9.


Part of the gain comes from weather forecasts that are now retreating from predictions of
widespread below-normal temperatures for this week. In the summer, hot weather can lead to
stronger demand for gas-fired power to run air conditioners.


A hot spring has already led power plants to consume their second-highest amount of natural gas
ever for the month of May, the U.S. Energy Information Administration said late Friday. It
reported that gas deliveries to power plants hit 23.7 billion cubic feet a day that month, nearly
14% more than May 2014.


The agency’s “Natural Gas Monthly” also showed the country’s production hit just 73.6 bcf in
May, more than 1 bcf less than expected and down 1 bcf from April production. That included
“big declines” from several states that have led that ongoing oil-and-gas boom and is “the
cornerstone to our more bullish” estimate of $4 gas on the way in the months to come, Tudor,
Pickering, Holt & Co., a Houston investment bank, said in a note.


“With the lower prices you have to expect production to get cut,” said Scott Gettleman, an
independent trader in New York. “So a combination of hotter weather and less production is
going to result in a rally.”


Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $2.75/mmBtu,
compared with Friday’s range of $2.735-$2.78. Cash prices at the Transco Z6 hub in New York
traded in a bid-ask range of $2.65/mmBtu to $2.75/mmBtu, compared with Friday’s range of
$2.10-$2.40.


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


FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND
MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES
MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY
RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT
IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE
RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL
DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED
IN THE PRICE OF THE UNDERLYING FUTURES