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Natural Gas May Rise on Colder Late January Weather Outlook

Jan. 4 (Bloomberg) -- Natural gas futures may rise next week as forecasts for colder weather later this month signaled increased demand for the heating fuel.

Five of 10 analysts in a Bloomberg survey, or 50 percent, predicted that futures will advance on the New York Mercantile Exchange through Jan. 11. Four, or 40 percent, said gas will fall and one said prices will stay the same. Last week, 50 percent of participants said gas would drop this week.

Below-normal temperatures will return to the western U.S. over the next 11 to 15 days with more seasonal weather in the Midwest, according to MDA Weather Services in Gaithersburg, Maryland. Predictions for mild weather before then sent gas futures to a three-month low yesterday.

“The significant selloff that has taken place in the last three trading sessions suggests that a rebound might be in order next week with any cool-down in the weather forecasts,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “It would be premature to write off the entire winter heating season.”

Natural gas dropped 18.2 cents, or 5.2 percent, to $3.287 per million British thermal units this week in New York, the first weekly decline since mid-December. Prices are up 6.2 percent from a year ago.

Even with slightly warmer-than-anticipated weather so far this heating season, prices should find support well above $3, Viswanath said.

Price Cap

“However, re-emerging concerns of a supply surplus will likely keep prices under $3.50 in the very near-term,” she said.

Gas inventories fell by 135 billion cubic feet to 3.517 trillion during the week ended Dec. 28, above the five-year average drop of 111 billion for the week, the Energy Department said today. Analyst estimates compiled by Bloomberg predicted a decline of 130 billion.

Stockpiles were 12.4 percent above the five-year average for the week, down from 12.8 percent during the previous seven days. The surplus dropped to 4.6 percent at the end of November.

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

5 4 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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