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Natural Gas Drops in Survey as Milder U.S. Weather Cuts Demand

Natural gas futures will decline next week to snap the longest rally since April as unusually warm weather limits heating demand, according to a Bloomberg News survey.

Six of 11 analysts, or 55 percent, said futures will fall on the New York Mercantile Exchange through Dec. 27. Four predicted gas will rise and one said prices will stay the same. Last week, 50 percent of participants said prices would gain.

Blasts of arctic air that swept the U.S. East over the past few weeks will give way to spring-like temperatures from New York to Washington over the next two days, according to forecasters including Commodity Weather Group LLC in Bethesda, Maryland. Prices yesterday surged to the highest level since July 2011 after the Energy Information Administration reported a record drop in gas inventories.

“It’s going to be 70 degrees in the Northeast and there is also that sickening feeling that we usually get” when prices near their seasonal peak, said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “It’s going to be hard to continue to keep a bid up in this market.”

Natural gas for January delivery jumped 10.9 cents, or 2.5 percent, to $4.46 per million British thermal units in the first four days of trading this week on the Nymex. Yesterday’s settlement was the highest since July 20, 2011. The futures are heading for a seventh consecutive weekly gain, the longest stretch since the nine weeks ended April 19.

Weather Outlook

The high temperature in Washington on Dec. 22 wil be 72 degrees Fahrenheit (22 Celsius), 27 higher than usual, according to AccuWeather Inc. in State College, Pennsylvania. New York City’s Central Park may see a high of 66 degrees, 25 above normal.

East Coast readings will then drop through the Christmas holiday and into the new year, said Matt Rogers, president of Commodity Weather in Bethesda, Maryland.

About 49 percent of U.S. households use gas for heating,according to the EIA, the Energy Department’s statistical arm.

Given swings in weather forecasts, some predictions for a cold surge like the one leading to the record inventory withdrawal are “a little too optimistic,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. The boost in gas prices will probably encourage electricity generators to burn less of the fuel and rely more on cheaper coal, he said.

Supply Levels

Gas inventories fell by 285 billion cubic feet in the week ended Dec. 13 to 3.248 trillion, the biggest drop ever based on EIA data going back to 1994. Supplies were 7.2 percent below the five-year average, compared with 3 percent the previous week.

A deficit versus year-earlier levels widened to 13.1 percent from 7.2 percent.

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 willprobably rise, fall or remain neutral in the coming week. This week’s results were:

RISE FALL NEUTRAL

4 6 1

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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