Natural Gas Futures May Drop as Moderate Weather Replaces Cold

Natural gas futures may drop next week on forecasts for moderate weather after a frigid start to January, a Bloomberg survey showed.

Seven of 14 analysts, or 50 percent, predicted that futures will decline on the New York Mercantile Exchange through Jan. 4. Five, or 36 percent, said gas will advance and two said prices will stay the same. Last week, 57 percent of participants said gas would rise this week.

Unusually cold weather will be replaced as warmer air spreads east from the central U.S. over the next 11 to 15 days, according to MDA Weather Services in Gaithersburg, Maryland.

A stockpile surplus expanded during the first half of December as above-normal temperatures reduced demand for the heating fuel.

“Even though we have colder temperatures every day that goes by, we still have plenty in storage,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “It’s not really cold enough to cut into that supply yet.”

Natural gas has fallen 9.7 cents, or 2.8 percent, to $3.354 per million British thermal units so far this week in New York. The futures are up 12 percent this year, heading for the first annual gain in five years.

Prices will probably stay in a tight range of around $3.30 to $3.50 with a “downward bias” because ample supplies, weather forecasts and thin trading volume during of the New Year’s holiday period, Flynn said.

Stockpile Decline

U.S. gas stockpiles probably fell by 72 billion cubic feet last week, based on the median of 11 analyst estimates compiled by Bloomberg. The five-year average decline for the week is 140 billion, Energy Department data show. Supplies fell by 87 billion the same time last year.

The department is scheduled to release the report at 10:30 a.m. today in Washington, delayed by a day because of Christmas.

Inventories totaled 3.724 trillion cubic feet in the week ended Dec. 14, 10 percent above the five-year average for the period, according to the department. The supply surplus was 4.6 percent at the end of November.

The gas survey has correctly forecast the direction of prices 49 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

5 7 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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