Bloomberg News

Natural Gas May Drop as Milder Weather Reduces Heating Demand

March 08, 2013

Natural gas futures may drop next week as a U.S. cold snap gives way to milder weather and higher prices make it a less attractive fuel for some electricity generators, a Bloomberg survey showed.

Eight of 14 analysts, or 57 percent, forecast that gas futures will decline on the New York Mercantile Exchange through March 15. Four, or 29 percent, said futures will rise and two predicted that prices will stay the same. Last week, 55 percent of participants said gas prices would advance this week.

Temperatures will be above normal across the West next week and seasonal in most of the central states, though the East may see unusually cold weather, according to MDA Weather Services. Gas futures rose to $3.603 per million British thermal units during trading yesterday, a price high enough to prompt some power producers to burn coal instead, said Aaron Calder, senior market analyst at Gelber & Associates in Houston.

“The forecasts have tempered a little bit,” Calder said. “Fuel switching is the main driver in this market. We saw some pretty strong resistance at $3.60.”

Natural gas futures so far this week have climbed 12.6 cents, or 3.6 percent, settling at $3.582 per million Btu yesterday in New York, headed for a third consecutive weekly gain. Prices are up 6.9 percent this year.

Chicago Weather

The low temperature in Chicago on March 14 will be 34 degrees Fahrenheit (1 Celsius) and Dallas may be 52 degrees, 4 above normal for both cities, according to AccuWeather Inc. in State College, Pennsylvania.

About 50 percent of U.S. households use gas for heating, according to data from the Energy Information Administration, the Energy Department’s statistical division.

Gas stockpiles fell by 146 billion cubic feet to 2.083 trillion in the week ended March 1, above the five-year average drop of 107 billion for the period, an EIA report yesterday showed. Analyst estimates compiled by Bloomberg showed a decline of 132 billion.

A supply surplus to the five-year average narrowed to 14.8 percent from 16 percent the previous week.

The gas survey has correctly forecast the direction of prices 50 percent of the time since its June 2004 introduction.

Bloomberg’s survey of natural-gas analysts and traders asks for an assessment of whether Nymex natural-gas futures will probably rise, fall or remain neutral in the coming week. This week’s results were:

RISE FALL NEUTRAL

4 8 2

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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