Wall Street Journal
Inventories Could Trump Cold for Natural-Gas Prices

Monday, January 25, 2010

January 25, 2010

U.S. natural-gas prices, beset by excess supply, tepid demand and mostly mild weather over the past year, may be pressured even lower this spring if the winter heating season ends with an excess of gas in underground storage.

Utilities, marketers and producers of natural gas stockpile the fuel during the fall and spring when demand for gas for heating and power for cooling is muted. Gas is typically withdrawn during the winter heating season, which the Department of Energy defines as the period from Oct. 1 to March 31.

But if moderate temperatures leave an unusually high volume of gas in storage by the end of March, contractual obligations and physical constraints could force the companies contracting for storage to send gas to market, driving prices lower.

"The effect on price could be pretty substantial and would send a very strong signal to the market," said Jack Weixel, a director of energy analysis for Denver, Colo.-based Bentek Energy.

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