WSJ: Natural Gas Wavers as Market Mulls Supply Replenishment
--Weather forecast points to variable temperatures, some lingering cold
--Market focuses more on whether supply can be replenished
--"People are waiting for the next move," analyst says
By Michael Calia
NEW YORK--Natural-gas prices wavered Monday on optimism over supply replenishment while forecasts pointed to moderating, but lingering, cooler temperatures.
Natural gas for April delivery fell 3.5 cents, or 0.8%, to $4.278 a million British thermal units on the New York Mercantile Exchange. Prices had risen as high as $4.350/mmBtu in early trade.
Much of the U.S. is due for another cold spell this week, but the picture becomes more variable throughout the country, with some lower-than-average temperatures lingering in the Northeast.
Some of the colder air expected to stick around in Canada over the next couple weeks could shift southward into the U.S., MDA Weather Services said in a note Monday. "But there remains a lacking of support for any noteworthy cold."
A severe winter has provoked higher demand for natural gas in the U.S., where nearly half of the homes use the fuel for heat. As a result, natural-gas supplies have fallen below the 1 trillion cubic feet mark to their lowest point since May 2003. Market observers are torn over whether supplies can adequately bounce back for next winter.
The recent price jump in the commodity--it hit five-year highs last month--has yet to lead to more drilling, Commerzbank Commodity Research said in a note, referring to the lowest U.S. gas rig count since April 1995.
"The gas rig count has tended in the past to correlate with the price of U.S. natural gas or to have been quickly adapted as prices have changed," Commerzbank analysts wrote. "We assume that the low level of response on the supply side will lend mid-term support to U.S. gas prices."
The market seems to be leaning toward the optimistic side, however, said Frank Clements of Meridian Brokers Inc. "A lot of traders are anticipating that we will be able to replenish natural-gas supplies in a timely fashion."
Prices have declined by about a third since peaking in February.
"In these lower-volatility periods, people tend to get out," Mr. Clements said. "People are waiting for the next move."
